What are the risk that CNY appreciate over time when other countries are converting USD debt into RMB debt? China has promised these countries that RMB will not have substantial appreciation?
Renminbi (RMB)/Yuan Appreciation & Internationalization
- Thread starter supercat
- Start date
this is pretty big news in terms of RMB internationalization. RMB has become the international currency for Russians
SGE gold price will continue to go up. Short seller of forward contract are being squeezed.
This SGEI vault thing is going way faster than I expected. That's already 3 countries with gold in SGEI vault.
supercat
Colonel
A lot of RMB/CNY loans:
RMB seriously needs to appreciate by 5% a year for the next 5 years.
Good FT Piece:
My thoughts:
Good FT Piece:
My thoughts:
- Trade frictions are inevitable at the level of trade surplus China is currently running. This year it's going to be 1.2 trillion in Goods alone. Almost every week, some country is imposing tariffs on Chinese imports, including friendly or neutral countries like Brazil, Indonesia, etc.
- RMB strength will lead to boost in consumer confidence because the value of Chinese savings in real terms would increase a lot, will also lead to further boost in disposable incomes. It is a way to drive wage growth when nominal wage growth in yuan terms is flatlining.
- Will lead to retention of science talent that China still continues to lose because of lower wages to US/Europe etc.
- Will create the creative destruction that is required in an economy. China already has a labor shortage in lower end segments. Unless the sector is critical like shipbuilding laborers, you don't need to manufacture at the lower end stuff like apparel, lower end toys, or low end plastic crap. There is far more than enough space left to be occupied for growth in aerospace, semiconductors, AI, medicine, medical equipment, you name it.
- All your USD/Euro assets will be frozen literally the moment a major crisis (say over Taiwan erupts). So why still continue to buy USD assets at such a large scale.
- RMB internationalization would increase, everyone wants to hold an appreciating asset.
There is a lot of demand in China for precious metals. Especially gold. And it seems like most of the demand/import have been the past 2 months.
While allowing RMB to appreciate sends a clear signal re: trade frictions and value retention of RMB holdings, the key driver for wage growth and therefore domestic spending is export margin increase, which benefits from a weak RMB. So the expectation is that appreciation will be limited, and if it rises too much and begins to impact margins it will be reigned in again.
In the domestic market, implementing policy to prevent destructive pricing (e.g. EV price war) will be of the most benefit to boosting the domestic economy; as expectations of lower future prices leads to wait and see behaviour rather than increased sales.