Keep China's Currency Peg
In the fall of 1988, Milton Friedman made a well-publicized visit to China where he was granted an audience with then Communist Party General-Secretary Zhao Ziyang. He kicked off his trip with a pronouncement that China should immediately decontrol its exchange rate and let domestic prices align with those on the world market.
A few months later, Professor Friedman joined members of the University of Hawaii economics faculty, including myself, at a luncheon. Mr. Friedman's views on China's exchange-rate policy seemed wrongheaded to me, but as a young assistant professor squaring off against a Nobel Laureate, I was quaking as I broached the subject. To my great relief, Mr. Friedman reacted by saying Zhao had convinced him that decontrolling the exchange rate wouldn't work. I was glad I didn't have to be the one to try to change Mr. Friedman's mind, and was left with great respect for Zhao's success in doing so.
Sixteen years later China is again being hit with the same bad advice from outside. Much has changed in China during that time. Domestic prices are now aligned with world market prices and China has become a major powerhouse in world trade. The country's peg to the dollar is a key factor in this success.
Yet the view that China's currency is undervalued and its peg should go has passed into global dogma, with the Group of Seven industrialized nations calling on Saturday for "more flexibility in exchange rates." Politically motivated foreign governments and well-meaning economists alike have called on China to revalue the yuan, float it, peg it to a basket of currencies or broaden the trading band. This has triggered massive speculative flows into China, despite the country's ostensibly tightly regulated capital account.
In the face of this pressure, the Chinese government has held firm. China's top banker Zhou Xiaochuan reiterated Saturday that Beijing fully intends to move to a more flexible exchange-rate regime in due course. But the current speculative torrent precludes any immediate move in this direction. Succumbing to pressure now, China would only be left more vulnerable to speculative episodes in the future having sacrificed the credibility of its commitment to a peg.
The speculative bandwagon not withstanding, is there evidence of undervaluation? An undervalued currency encourages exports at the expense of imports and capital inflows at the expense of outflows. Resulting surpluses on the current and capital accounts of the balance of payments support accumulation of official foreign reserves -- in the amount of $207 billion for China in 2004. But China's trade surplus explains a scant $32 billion of this. Moreover, imports have been rising faster than exports in the context of overall trade doubling in just two years -- hardly suggestive of perverse trade incentives.
Growth on the capital account has been even more spectacular, with the form of flows much in flux. Foreign direct investment has long been a contributor to net surplus, last year to the tune of more than $50 billion. New since the latter part of 2003 have been multi-billion dollar inflows for investment in Chinese stocks. New going forward may be substantial outward direct investment as Chinese state enterprises seek takeover prospects to secure energy and raw materials and to establish brand names in the global marketplace.
Reserve accumulation has occurred for a number of good reasons. A lesson of the Asian financial crisis is that when reserves are not on hand to defend a currency, exchange-rate adjustments can vastly overshoot ultimate equilibrium levels. One motive for the Chinese government to accumulate reserves is thus prudential. Another is that China's domestic capital markets are immature and not capable of managing risk, hence foreign capital performs this function while in exchange Chinese savings are held in more secure claims on assets overseas such as U.S. treasuries and corporate bonds.
A third reason for reserve accumulation is that growth in capital flows has been so fast it is simply hard to keep up-especially when the big decisions regarding foreign investment are still made by the state. Between the first half of 2002 and the same period in 2004, short-term loan inflows jumped to $74 billion from $13 billion and inflows for foreign purchase of equity securities to $6.8 billion from $0.1 billion. But China's regulated capital account has always been more liberal on the inflow side, and steps to liberalize outflows are being taken cautiously.
Under the shelter of a pegged exchange rate, China's financial system is absorbing tremendous growth in international loan activity; its equity markets are experiencing strong entry of foreign funds; and its own position as an investor in global business is being asserted. Financial systems rest on confidence. Confidence in China's is served by continued adherence to what is an appropriately valued currency.
The Chinese government has recognized the need going forward to introduce greater flexibility into its exchange-rate regime. This could reasonably mean a move to a broader trading band in the coming year or so but with a continued commitment by the government to drive the market back to the peg within that band. In concert with this, access to the Chinese foreign exchange trading system needs to be broadened so that competitive forces can determine price. As it now stands, state banks dominate the market with the central bank stepping in to clear it. Moreover, forward instruments for hedging will need to be developed. These steps will require that restrictions on the capital account be further loosened.
Many believe China should switch to a basket peg from the current dollar peg. Such a switch is inadvisable. A single-currency peg sends a clear signal to markets of the government's commitment. Belief by markets in the authorities' intent and ability to maintain the peg will tend to prevent the trading band from becoming binding at its limits and reduce the degree of government intervention needed to preserve the band.
In addition, the dollar serves as the basis for a de-facto common currency peg for much of the Asia region. Regional integration of the supply chain has proceeded rapidly in recent years facilitated by this common peg and the associated mitigation of exchange rate risk. The common peg is particularly vital with respect to Hong Kong given its deep engagement with the south China region.
Sound management of China's exchange-rate regime has served as a pillar for both domestic growth and regional economic stability. The country's balance of payments situation provides no compelling evidence of currency undervaluation. China has shown wisdom and resolve in sticking to its peg in the face of speculative pressure.
Ms. Wiemer, a visiting fellow at the East Asian Institute of the National University of Singapore, has co-edited with Heping Cao, "Asian Economic Cooperation in the New Millennium: China's Economic Presence" (World Scientific Publishing, 2004).
中国应当维持联系汇率制
1988年秋，密尔顿?弗里德曼(Milton Friedman)访问北京，受到各界人士的广泛欢迎，得到时任中共中央总书记赵紫阳的热情接见。弗里德曼用一项声明开启了他的中国之行，那就是中国应该立即放开汇率管制，让国内市场价格随同国际市场价格一起波动。
几个月后，弗里德曼教授应邀参加夏威夷大学(University of Hawaii)经济系教职员工的午餐会，笔者有幸恭逢其盛。弗里德曼对中国汇率制度的看法在我看来并不正确，但作为一名年轻的助教，在一位诺贝尔桂冠获得者面前反驳他的观点，我不免有些战战兢兢。但让我大为宽怀的是，弗里德曼教授回答说，赵紫阳已经说服了他，表示放开汇率管制并不可行。我很高兴自己不是试图改变弗里德曼观点的唯一一个人，而且对赵紫阳能成功做到这一点心怀敬佩。
十六年弹指一挥间，中国又一次遭遇外界同样的不恰当建议。这段时间中国的状况已经大为改观，国内市场价格已经跟上了国际市场的脚步，中国已经成为全球贸易的主要力量。而人民币同美元挂钩的汇率制度正是取得这些成功的重要因素。
但人民币被低估，同美元挂钩的制度应该取消已经成了风靡全球的观点。七大工业国上周六呼吁执行“更加灵活的汇率制度”。受政治利益驱动的外国政府，以及目的友善的经济学家们纷纷呼吁中国重估人民币币值、让人民币自由浮动、或者同一篮子货币挂钩、或者放宽人民币交易区间。这些洋洋大观的评论促使大量游资涌入中国，置中国严格的资本帐户管制而不顾。
但在这些冲击面前，中国政府不为所动。中国央行行长周小川上周六重申，中国政府完全认同在适当时候采取更灵活汇率制度的目标。但目前大量涌入的投机资金排除了针对这一目标采取任何近期措施的可能性。如果屈从于目前的压力，只会让此后的中国在投机资金面前更加脆弱无力，承诺实行联系汇率制的信誉也就会荡然无存。
投机资金不会久留，但是否有证据表明人民币确实被低估了？低估本币的结果是以进口成本为代价推动出口增长，以资本流出为代价吸引资金流入。国际收支表上经常项目和资本项目会出现盈余，并导致外汇储备增加──中国2004年外汇储备增加了2,070亿美元，但其中的贸易顺差只有320亿美元。此外，中国进口成本的增速高于出口，短短两年之间贸易总额已经增长一倍──很难说人民币被低估是促进贸易增长的动因。
资本帐户的增速一直让人瞠目结舌，资本大量流入。外商直接投资一直是推动中国实现贸易顺差的主要因素，去年超过了500亿美元。2003年下半年数十亿美元流入的资金投向中国股市是一个新生迹象，未来的新迹象将是中国向外大量进行直接投资，国有企业四处搜寻收购机会，获取稳定的能源和原材料供应渠道，在国际市场创出自己的品牌。
外汇储备增加有几个很充分的理由。亚洲金融危机的教训是其一，即如果没有充足储备保护本币，汇率的波动就会远远突破均衡水平。这一谨慎的考虑是中国政府囤集大量外汇储备的动机之一。其次就是国内资本市场不够成熟，不能有效管理风险因素，因此外资就承担了这一角色。中国居民的储蓄被投往美国国债和公司债券等保险系数较高的外国资产。
第三个原因就是资本流入太多太快，难以长期为继，尤其是在外商投资等重大决策仍然由政府控制的情况下。2002年上半年至2004年上半年，短期贷款资金流入从130亿美元一跃而至740亿美元，外国投资者对中国股票的投资也从1亿美元激增至68亿美元。但中国对资本流入的管制历来较为宽松，而放宽资本流出管制则步步为营。
在联系汇率的保护伞下，中国金融系统消化了国际贷款活动的巨幅增长；股市正在迎接源源不断的外资；中国自己作为全球商业领域投资者的身份也已经确立。金融系统的支柱是信心。对中国的信心就源自坚决执行恰当估值的本币的做法。
中国领导人已经认识到引入更加灵活汇率制度的必要性。合理的推测是这一年前后中国政府会采取措施放宽人民币交易区间，但会继续坚持在这个区间内维持联系汇率制度。要保证这一点，就需要拓宽进入中国外汇交易体系的渠道，让各种市场力量相互竞争以确定价格。目前，国有银行垄断市场，央行正在逐步清理金融体系。此外，还需要开发用于保值的远期金融工具。而这些都需要政府放松对资本帐户的控制。
许多人都相信中国应该用一篮子货币取代美元来与人民币挂钩。果真如此可真是失策。与单独一种货币挂钩可以向市场清楚表明政府的决心。市场相信了政府的意图以及维护挂钩汇率制的能力，才能防止投机者不断冲击交易区间的极限，也减少了政府防守交易区间施加干预的必要。
另外，美元是许多亚洲国家事实上的通用挂钩货币。这种做法削弱了区域内的汇率风险，从而加快了近几年区域性供应链的整合步伐。与单一货币挂钩对深深涉足中国南部市场的香港来说尤为关键。
合理有效地管理中国汇率体系不但是国内经济发展，也是整个区域经济稳定的基石。中国的国际收支表并没有提供什么人民币被低估的有力证据。在强大的投机压力下，中国人展示了坚守挂钩汇率制度的智慧和决心。
编者按：本文作者Calla Wiemer是新加坡国立大学(National University of Singapore)东亚研究所(East Asian Institute)访问学者，曾与曹和平合著《Asian Economic Cooperation in the New Millennium: China's Economic Presence》一书，由World Scientific Publishing于2004年出版。
