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新海归系列：胡祖六 -- 安普若 - (5086 Byte) 2004-1-16 周五, 08:35 (1940 reads) |
花仙子她表妹
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作者：游客 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
Applaud Capital Controls
***Capital controls are necessary to stop destructive currency
volatility
Without capital controls, Fed policy swings can cause huge currency
swings in Asia related to change in export competitiveness. Korea is
doing the right thing - tightening capital controls to minimize
unnecessary currency swings that are destructive to the real economy.
***Appreciation today would mean depreciation tomorrow, when the Fed
reverses
Allowing currency to appreciate now would only lead to depreciation when
the Fed reverses its interest rate policy. As Asian economies have no
export pricing power, such currency swings would do much damage to their
real economies.
***But, Korea must pursue industrial restructuring
Korea is losing competitiveness to China in commodity industries. It
would be wrong to weaken the currency to protect such industries, which
would reduce Korea's standard of living. Korea must restructure to
shift its economy into more competitive industries.
Summary and Investment Conclusion
---------------------------------
Korea is restricting currency trade to protect its industrial base.
Otherwise, liquidity inflow, which results from a loose Fed policy,
could push up the currency, while Korea's export price continues to
decline, and inflate its property values, which would be ruinous to the
financial system.
I believe that the government is doing the right thing under the
circumstances. Korea should make its currency consistent with the pace
of its industrial restructuring. However, it would be wrong to keep the
currency down to whatever level is necessary to preserve the existing
industrial structure. The currency policy should be used to cushion the
necessary restructuring rather than to prevent it. Otherwise, Korea's
standard of living could decline.
Torrent of Money Betting on Won Appreciation
--------------------------------------------
Korea has been receiving a large amount of capital into either its
equity market or its money market. While Korea has suffered a widening
deficit in direct investment, its foreign exchange reserves rose by
three times as much as its current account surplus in the first 11
months of 2003, of which foreign purchases of Korean stocks accounted
for half, i.e., more speculative capital accounted for one-third of the
increase in Korea's foreign exchange reserves.
Moreover, the speculative part of capital inflow appears to be
escalating. In December 2003 alone, foreign exchange reserves increased
by US$5 billion. As the ECB starts to complain about too much Euro
appreciation, the global foreign exchange market is bound to turn more
of its firepower towards Asian currencies. With so much liquidity
sloshing around the world, there is a serious risk that the wall of
money could overwhelm the Asian central banks. Hence, tighter capital
controls would be only way to maintain currency stability in the region.
Exhibit 1
Capital Inflow Now Dominates BoP
-------------------------------------------------
Current Forex
(US$ bn) Account Surplus Reserves Increase
1980s 18.5 9.5
1990-77 -56.8 5.2
1998-2002 90.5 101.0
Jan-Nov 03 10.2 28.9
Dec 03 5.0
--------------------------------------------------
Source: CEIC
Policy Dilemmas
---------------
Korea faces two dilemmas concerning strong capital inflows. First,
Korea's export price remains weak while its terms of trade continue to
deteriorate. Currency appreciation would impair Korea's export
performance, while the consumer debt overhang is holding its consumption
down. Thus, an appreciating currency would have a more negative impact
on its economy than usual.
Second, weak investment due to declining industrial competitiveness is
triggering a massive liquidity boom without foreign capital inflow. It
led to the consumer credit bubble in 2002 and a nearly 50% increase in
Seoul's property price since 2000. Liquidity inflow would force Korea
to cut its interest rate or face massive appreciation; its discount rate
at 3.5% is much higher than the Fed funds rate at 1%. Lower interest
rates could inflate a property market that is just cooling; the
financial system could suffer terribly afterwards.
Capital Control Is the Least Bad Choice
---------------------------------------
The Fed targets US demand with its interest rate policy. Because
multinational companies have the ability to optimize production around
the world independently of where demand is, the Fed has to move interest
rates more to achieve the same boosting effect on the real economy.
The resulting massive swing in the US interest rate has a nasty
byproduct in terms of creating financial volatility. In most cases,
financial bubbles accompany Fed policy swings. Thus, countries that
trade with the US are faced with the choice of whether to accommodate
the financial fallout from Fed policy swings via the exchange rate.
But, for economies with high export to GDP ratios, such big currency
swings would cause havoc in their real economies.
For example, if an Asian economy appreciates its currency to reflect the
low US interest rate, it would have to depreciate the currency when the
Fed raises its interest rate. Such currency swings make it extremely
hard for producers to control their costs.
Of course, if an economy has more freedom to adjust its export price, it
would be able to use currency to adjust to the Fed policy swings. But,
Asian economies ex-Japan have little pricing power. It is too costly to
adjust currency value to reflect financial flows without corresponding
change in export prices or competitiveness.
This is why Asian governments must tighten capital controls now to
protect themselves against the harm that an extremely loose Fed policy
could inflict on them. What Korea does, in my view, would be followed
by other countries, if the Fed keeps its rate so low for long.
But, Don't Forget Restructuring
-------------------------------
Korea, however, isn't just facing Fed policy volatility. Its investment
weakness reflects its diminishing export competitiveness, as China
builds its presence in commodity industries that still dominate the
Korean economy. Whenever China builds up an industry, the price goes
down significantly over time. Korea's per capita income is about 10
times as high as China's. Cost cutting isn't likely to make Korea as
competitive in these industries as China. Hence, there is always the
temptation to reduce the currency value to help these industries.
That would be dangerous. Currency depreciation to help industries with
declining competitiveness will make a country poorer. The right
response is to get out of these industries and develop industries that
China doesn't have. Only such a strategy would help Korea to preserve
its living standard premium over China.
Andy Xie (Hong Kong)
作者：游客 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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 新海归系列：胡祖六 -- 安普若 - (5086 Byte) 2004-1-16 周五, 08:35 (1940 reads) - 挤一挤，把谢国忠的报告贴一贴 -- 花仙子她表妹 - (14288 Byte) 2004-1-16 周五, 10:00 (397 reads)
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