SMM News: on July 9, the China Finance 40 people Forum and the Foreign Exchange Research Center of the State Administration of Foreign Exchange hosted a seminar on "China's Foreign Exchange Management Reform and Development." at this conference, Zhou Xiaochuan, former governor of the people's Bank of China and president of the China Monetary Society, attended and delivered a speech.
At the conference, Zhou Xiaochuan said that the economic and financial crisis is inevitable, so it is necessary to study and prepare ahead of time.
In addition, Zhou Xiaochuan, the cryptocurrency issued by Facebook, said it was a signal that institutions were trying to build such a more global currency and needed to be careful about the erosion of weak currencies by strong currencies.
So what should China do at this time? Where should the RMB go?
Zhou Xiaochuan: the financial crisis is inevitable! China needs to study and prepare ahead of time!
Zhou Xiaochuan said: the economic and financial crisis is inevitable, and carrying out forward-looking research in advance will help us to prepare ahead of time. When the economic crisis occurs, there will be fewer weaknesses and fewer problems, so that we can gain an advantage in the competitive pattern of the economy and the world.
In his speech, Zhou Xiaochuan said that China is now the largest country in world trade and the second largest economy in the world, which is a gradual process, and the most obvious stage of narrowing the gap is after the subprime mortgage crisis in the United States. In 2006, before the subprime crisis, the Chinese economy was less than 20 per cent relative to the US economy, and in 2017 it was 67 per cent of the US economy at the current exchange rate. In the course of a decade, the gap between China and the United States has narrowed significantly.
Crypto currency Libra suggests that institutions are trying to build a global currency, beware of strong currencies eroding weak currencies!
At the same time, a major focus of the meeting was recently issued by the US technology company Facebook encryption currency Libraa!
In response, Zhou Xiaochuan said that the emergence of Libra has put forward an idea that has had an impact on traditional cross-border business and payment systems. In the future, there is likely to be a more international strong currency, it is possible to exchange with the current major sovereign currencies, and even become the main currency in circulation in the world.
"it is not known whether Libra will succeed in the future, and it is likely to be replaced by better ideas or stricter, more stable and more efficient electronic money," Zhou said. But judging from the trend in recent years, a number of institutions are trying to build such a more global currency, when there will be the problem of strong currencies eroding weak currencies. "
The former central bank stressed that the strength of the currency is also directly related to capital flows.
"the current strong currency is the US dollar, saying that the strong currency eroding the weak currency is the US dollar eroding other currencies," Zhou said. In the future, retail shopping and asset transactions can be conducted directly in US dollars, which will also lead to capital flows. "
In the past many years, the global emergence of the dollarization process, the Federal Reserve raised interest rates, the dollar is "returning" to Wall Street in the United States! In this regard, Zhou Xiaochuan believes that this is the erosion of the US dollar against weak currency countries, so in the future, we also need to be careful of the problem of strong currency erosion of weak currency!
Zhou Xiaochuan: China needs to be prepared in advance to make the RMB a strong currency!
In addition, this time, a major focus of the conference is the crypto currency issued by Facebook Libra!
In this regard, the experts attending the meeting also believed that in the short term, although digital currencies such as Libra cannot replace the status of legal tender, in the long run, they are bound to have an impact and impact on the existing international currency and payment fields, and the Chinese government and institutions should pay close attention to and actively participate in the research and layout in related fields.
Zhou Xiaochuan also said in his speech that in the era of globalization, foreign exchange management is facing challenges brought about by new things such as Libra.
"We need to be prepared in advance, and we need to be prepared in advance to make the renminbi a strong currency," Zhou said. From the perspective of local and foreign currency integration, the RMB will be in a favorable position in the future international and global competition to serve China's economic development and 'Belt and Road Initiative', while maintaining economic stability and preventing the economic crisis. "