几十年的出口导向型经济破坏了我们的生存环境,经过几十年的发展,中国也具备了高科技产品的研发能力,是不是转型在即了,人民币对美元大升值倒计时。
How China Is About to Flip from Trade Exports to Trade Services
The Made In China label became a symbol of
economic production lost in the western world alongside the rise of
cheap labor and goods from the emerging economies. The cultural meme of
“everything made in China” became common and could be heard at any
given moment, anywhere in the developed world.
Whole industries and business models were built
around the economic methodology of exporting cheap goods. Such as
numerous chains of dollar stores, and brand name clothing outlets, which
manufactured products in the Chinese provinces with the lowest labor
costs, and then sold the goods at inflated prices to the developed
world.
China now has the largest economy on Earth, and
the monetary structure which made the USD the center of the solar
system is shifting towards a multilateral framework. The Chinese
currency, renminbi (RMB), or otherwise yuan, which is the unit of
measurement, (such as the relationship between the British sterling and
its unit of measurement the pound), will soon no longer be taking a
subservient position against the American dollar.
The yuan, in both its on-shore and off-shore
variations, has also been called the redback, drawing on the nickname of
the USD, and it’s civil war version, the greenback. For years the
redback has maintained a managed currency peg with the USD. This
exchange rate regime has been managed by the Chinese government and the
People’s Bank of China at an undervalued false exchange rate.
Over the last 5 years the redback has become
more widely used for global payments, financial investments, and reserve
management. The large amount of Bilateral Swap Agreements, BSA’s, and
broader acceptance, has not yet been priced into the valuation. Nor has
the growing status of the Chinese economy itself. Read more in the post
Renminbi Is Already A De Facto Reserve Currency.
One of the main reasons for the
internationalization of the RMB is directly related to the multilateral
supra-sovereign reserve asset called the Special Drawing Right. The SDR
is the unit of account used by the International Monetary Fund and is
being re-worked as the global reserve unit of account which will replace
the USD in the coming months and years.
The SDR basket is currently based on the
valuations of the USD, the yen, pound, and euro. Every 5 years the
basket is adjusted and currencies are included or removed. This the
year the basket will again be adjusted and the redback will be added.
There are a number of reasons supporting this
measure, but none more so than the need for stability in global
liquidity. The growing sovereign debt crisis which is spreading from
country to country will require large scale debt restructuring on a
level that no one economy or domestic currency can handle effectively
and efficiently.
The optimization of sovereign debt
restructuring will take place through multiple methods, such as
the SDRM process of the IMF, or Sovereign Debt Restructuring Mechanism.
Other methods will be CAC’s, or Collective Actions Clauses. The CAC
process will be initially, and primarily, used as a method of
incorporating into the issuance of RMB bonds – which will be used in a
broader array of debt instruments and bank loans – the methods to
address the sovereign debt issue. This process will be used in Greece
and the Eurozone as the multilateral develops further into its broader
global framework. See post BRICS SDR to Bailout Eurozone.
The RMB CAC and BSA dual machinations will
build upward towards the SDRM and the utilization of SDR denominated
bonds to address global liquidity concerns. These bonds will be issued
through the BRICS Development Bank and other financial institutions as
the process is expanded internationally.
The inclusion of the redback in the SDR basket
is required to bring broader stability to the SDR before the debt
restructuring can begin in both CAC and SDRM methods. This stability can
only be realized if the RMB ends its managed peg to the USD and is
allowed to free float on the forex markets.
The yuan is significantly undervalued and needs
to be strengthened before its inclusion into the SDR basket. The
initial IMF meeting to discuss the SDR is in May of this year, with the
actual adjustments taking place in the fall months. This means that
sometime in the next few months Chinese authorities will have to end the
managed peg and allow the redback to become more market oriented.
There is a concern amongst economic analysts
that China is headed for a “soft landing’ or a “hard landing” as it’s
credit markets contract and economic growth slows alongside the global
deflation which is worming its way through the sinuses of the existing
international system. This line of thought continues into the managed
float regime as conclusions are made and published that China will not
allow the redback to float freely on the forex markets because it could
lead to a devaluation.
This simply will not happen because the actual
real world value of the RMB has not been priced into the managed regime.
Once the managed peg is ended and the currency free floats, the yuan
will experience strong real exchange rate appreciation as the existing
BSA’s and foreign reserve amounts increase dramatically alongside the
further internationalization and inclusion into the SDR basket.
The argument which is made against the
appreciation of the yuan is that it would destroy China’s trade
exporting economy. As such, it would further reduce economic growth and
deepen the contraction of credit markets in the country.
What isn’t widely accepted is that the
appreciation of the RMB and a move away from the existing trade
exporting model is exactly what China wants. Not only do they want it
to happen, but they have taken strategic and necessary steps to ensure
that it happens.
Over the last 10 to 15 years China has
continued to modernize along with the flow of economic growth. At one
point, China was building the equivalent of three Chicago’s every year.
The construction of these ghost cities, which have remained relatively
empty, created a world wide shortage of iron and rubber.
Many analysts assume that since these cities
have sat empty all this time that it was a clear sign of a real estate
bubble in China. But nothing could be further from the truth.
The engineering of the ghost cities were a part
of the National New Urbanization Plan which intends to move 100 million
people from the rural population into the cities by 2020. The intent
is to increase the urban population of China by 60% and create a larger
consumer class as the economy shifts away from the exporting model.
This will be the largest human migration in the
history of the world. The economic strategies and cultural engineering
used to accomplish it will be studied for generations to come.
China is about to create a middle class.
In its efforts to regain the superpower status
which it had previously held three times in the last 2000 years – the
Han Dynasty, the Tang Dynasty, and the Qing Dynasty – China has
developed an urbanization plan which is meant to attract “elite human
talent” to the “elite cities” which will be structured under strict
population controls and citizenship will be based on a point system.
As the old world USD based system recedes into
the shadows of yesterday, (like the British Empire before it) we can
determine that the National New Urbanization Plan of China will become,
under the emerging multilateral framework, the Global Urbanization Plan
of the United Nations. See post Development Goals of the New World Order and The Globalization of Central Banks.
For all the GDP growth and opportunity to
modernize which the exporting model afforded China, it came with some
increasingly apparent downfalls. First, the trade exporting model
creates massive inequality within the population, which is being
addressed by increasing the percentage of urban population and
decreasing the percentage of rural population.
Secondly, it contributed directly and
indirectly to under-consumption and over-investment. This will be
reversed by shifting the Chinese economy from the existing trade
exporting model to a trade services model.
The exporting model is self-explanatory but the trade services model may need some further review.
As the redback appreciates and is added to the
SDR as one of the reserve currencies making up the basket, China will be
looking at ways of expanding existing services and creating new ones.
These services consist of financial services (think Eurozone bailout and
McDonald’s bonds), communications, transportation into international
markets and regions, promoting tourism, and the exporting of media and
traditional Chinese values and heritage.
Chinese economic strategists have a set a
target of reaching $1 trillion of Trade Services by 2020, the same year
in which the urbanization plan is set to include 60% of the population.
This is a dramatic shift away from the policy of exporting goods which
carried the growth of the Chinese economy for decades.
When China ends the managed peg to the USD, other ASEAN economies will follow. As a broadening of the Chiang Mai Initiative Multilateralization,
member countries such as Vietnam, Malaysia, and Indonesia, amongst
others, will also end existing pegs and establish floating pegs with the
RMB. The strong economies amongst the group will see currency
appreciations alongside the redback. See posts Why the Vietnamese Dong Will Reset, The Dongs Revaluation is Imminent, and Dong & the Pan-Asian FX Trading Center.
The geopolitical tension which is taking place
in the world is symptomatic of this transition away from the unipolar
USD based system towards the framework and macroprudential policies of
the multilateral SDR based system.
The USD, which has held the position of the Sun
in the solar system since 1944, will soon be relegated to the position
of a Jovian Giant, alongside the redback, as the SDR moves into the
center position, from which all other currencies and commodities will
both define, and maintain, their orbits.
The greenback, like the redback, are both about
to go through some dramatic adjustments and re-engineering as the
multilateral continues to emerge. – JC