First to clarify two things. First, some people refer to the Chinese industry is currently experiencing great difficulties, attributed to the financial turmoil of the Earth. This is no doubt that the storm brought destruction, but these are China, on September 14 this year, Lehman Brothers after the accident trouble, and the Chinese industry was killed in the morning began to clear more than half a year. Manufacturers have a very consistent view. Before the storm so that they can lose a major revaluation of the yuan against the dollar, mainly due to the closing of the new labor contract law. The latter so that they go from despair to disappointment. Manufacturers of awareness and appreciation of the yuan was brought about by the damage is likely to be transitional, top Beijing know that their plight might consider them. The new labor law is right tooth is teeth. More than half a year ago, Hong Kong sent to Beijing to hear the words out, one after another trend is to carry on.
And to deal with China's current economic difficulties, there should not be confused: RMB together with the new labor law is one thing, the financial crisis is another matter. In the latter as an excuse for the former is a serious mistake, because the nature of the differences between the two, or a rescue strategy to deal with are different. I have a rough estimate for the former countries of the loss, not just said. This can be accurately estimated to be very difficult, but a rough estimate is not difficult, not far off, and there are relatively intelligent observation of the graduate students can be able to pass.
The second thing to clarify is that some of the readers I have read criticism of the new labor law articles, which they said the local government has not really implemented, there is no equivalent, where there are black sheep in Kenya? I know there is the implementation of regional difference. Beijing and Shanghai, the implementation was very tight, both sides said to be employees of the court in winning over 90 percent. Though busy in some areas, employees do not quarrel with no matter. There are some places, the cadre of companies say it is best if we did not mention the new labor law, or covertly to teach manufacturers how easy way out. These are not the problem. The problem is as long as there is a new Labor Law, Beijing can always adhere to the strict implementation of this law, local governments how to fight song chapter, investors did not dare to bet.
The current situation is very grim. Observation of the three are an ill omen! One, plant rental slump, many vacant factories. Second, the income of workers has declined markedly. Third, a few months ago, I observed and wrote back to the influx of workers and is currently soaring. Unfortunately, these three are serious since the financial turmoil in the months before. Beijing should not wait any longer.
Complex issues simple to find the point of view; simple question to the search for a complex. This is what I deal with economic problems. RMB appreciation of the problem appears to be simple, in fact, quite complex, let me point you to explain.
(A) around May 2003, I am opposed to the appreciation of RMB against the U.S. dollar. This is not because of the need to maintain or increase the trade surplus, but at the time of China's agricultural development have changed their jobs well, some in Asia and the backward state of development worth seeing, we have a mutual co-existence, together with the development of the balance point. RMB appreciation, China's cheap labor on the state of competition is to race, was clearly and logically to improve the lives of the farmers will be hit.
(B) revaluation of the RMB is not easy to improve the U.S. trade deficit - the elasticity analysis of the relationship I had. Not so clear that the yuan revaluation will not improve employment opportunities for American workers. China bought fewer U.S. goods, on behalf of those who are lagging behind other states or developing countries. At present, China's export products are generally not made the United States, U.S. investment in Mexico is the turn of the output will not turn to the United States. If the United States advanced product is a high level of appreciation of the RMB will not encourage the U.S. to go to the low: the minimum wage is too high. From another perspective, this view when he was in office, Greenspan saw. He believes that the yuan to appreciate, not to increase employment opportunities for American workers, but that the RMB appreciation is not Shoubu Zhu. I do not agree with Greenspan on this point because there is pressure on the currency decline is not easy to observe, there is increased pressure is easy, they are asymmetrical.
(C) China's huge trade surplus with the unwise, not to mention give rise to international or political opposition to attacks. This is the way to solve the surplus rather than the appreciation of the renminbi (non-elasticity would be counter-productive). To reduce China's trade surplus, the choice is the abolition of China's import duties. This will certainly increase in the United States and other advanced state of the employment, to the satisfaction of all. Beijing has not done so is wrong: import duties to encourage the sale of counterfeit goods by encouraging the sale of fake drugs, neither can the Chinese people enjoy more international brands, we can not improve the advanced state of China's unfriendly sense. Although a few months ago, I infer, a year after China's trade surplus will be turned into a deficit (see here today, do not change), the abolition of import duties or is a. This will be outside to relieve the pressure on RMB appreciation, but also Europe and the United States to help you at this time of financial difficulties. Yes, they buy more products than go out to borrow money wise.
(D) think of something very important. More than 20 years ago and won the Nobel British economist Hicks (John Hicks) together, the general trend of the world, he said that the United States in the 1930s Great Depression led to the proliferation of global disaster, mainly due to the sharp contraction of international trade. He believes that if the contraction of international trade has not, will not be the spread of the Great Depression. He explained to me very convincing.
Not long ago, I said, because the international community not to use the 1930-based currency system, deflation is not as easy as the spread of the past. The problem is the situation today, international trade is also a sign of contraction. This is a disaster of the Earth. Hicks's see if there is nothing wrong - I do not think there is wrong - whether it shrink not shrink the trade today is to try to expand international trade has been an important moment. Beijing to negotiate with other countries and we can work together remove tariffs. To the expansion of international trade to assist current approach to Earth, unfortunately, is a high-game.
(E) appreciation of the RMB to China's industrial calamity, is not limited to the appreciation in itself brought about by competition and developing countries. Equally important, some manufacturers ─ ─ ─ ─ that is more important is that there are Chinese foreign exchange control, can not export to the RMB clearing. This is because foreign exchange controls, foreign investors to buy the yuan is not easy to find a few. China's foreign trade transactions as a forced companies, mainly U.S. dollars.
On the other hand, the appreciation of RMB against the U.S. dollar trend is clearly, but foreign exchange controls, the Chinese manufacturers is not easy in the foreign exchange market to hedge contracts to protect themselves. On the other hand, again, over the past few years on some of the increase in the rate of the RMB to see quite accurate, speculation in the foreign exchange profits, so that the Renminbi against the U.S. dollar in the cash and futures of the considerable difference between going on for several years. In that case, China's export prices manufacturers difficult. Readers think. Factory output, gross margin 30-35 percent is normal, meaning a net profit of about 10 percent. RMB appreciation, manufacturers generally do not patent the gross margin fell to around 20 percent, saving as much as possible, the net profit of about 3-5 percent. This is a small net profit would be easily to changes in the value of the cash and futures, or the difference between a waste.
(F) exchange control, together with the central bank used to suppress demand for ways to restrain the yuan's appreciation, manufacturers through regular exchange and remittance banks have a lot of sand (that is the existence of domestic banks in foreign currency, it is necessary to have restrictions on withdrawals). Gravel to force manufacturers to use these underground banks and money changers to deal with the matter. The question is, underground banks is illegal for a long time in the near future by the government to block. This is a plant to do another big headache.
Readers know, Hong Kong and the domestic underground banks have existed for decades, or even earlier than 10 years ago, the existence of these banks is to make the black market exchange rate for a small fraction of the price difference. Today the situation is different. On the black market exchange rate will no longer exist, underground banks earned by the main operational efficiency than the regular high banks. To exchange the RMB, the bank has procedures troubles, the banks have not the slightest bit of trouble; remittances through banks to a few days, banks only a few hours. I think the central bank should review this to be. Today, the existence of underground banks is not because of any profits on the black market exchange rate, but the formal operation of the banks on the efficiency of Doubu Guo banks. How could it? Have the same efficiency, who has not visited in the lose some of its credibility on the banks. Today it is clear that the existence of banks because the central bank on the bank of the exchange, remittances, money Guandetaiduo and so on. I understand that the Mass is sometimes involve changing or remittance to the customer's illegal acts to remove the pipe will Meeting of legalization.
(G) remove foreign exchange control China's industrial development is important, but in the current industry difficulties for various reasons, this withdrawal is even more important. On the other hand, revocation of exchange control will bring other complex issues. Limited space, is something for the future.
(H) because of China's industrial killed in recent months has been to the yuan's strength! If at this point in time and forced the yuan to appreciate further, would be a disaster.