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 《财经时报》：人民币主动升值5%气候渐成 |
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《财经时报》：人民币主动升值5%气候渐成 -- 游客 - (8614 Byte) 2004-2-07 周六, 10:54 (1204 reads) |
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作者：游客 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
Tighten Capital Controls, Please
***Speculative capital is the source of currency pressure
Speculative capital rather than trade surplus is the main source of
appreciating pressure on Asian currencies; foreign exchange reserves in
the region have risen mostly due to such capital inflow rather than
trade surpluses or FDI.
***Appreciating the currencies would only encourage more speculation
Caving in to speculators would only incite more speculation. As the
amount of speculative capital is massive relative to the size of Asian
economies, it would require a massive amount of appreciation to stop the
capital inflow. A financial crisis will inevitably follow such
appreciation.
***Tightening capital controls is the only answer
Tightening capital controls, i.e., arresting people who bring in money
illegally and shut down offshore currency markets, would be the only
solution to stop the inflow.
Summary and Investment Conclusion
---------------------------------
Speculative capital flow into Asia reached a record last year,
surpassing the previous peak in 1996. The recipients of capital inflow
were Hong Kong, Korea and Southeast Asia in 1996. China is the main
recipient this time. As what occurred to the recipients of capital
inflow in 1990s, China is experiencing an investment bubble.
The Fed commitment to keeping interest rate low for 'a considerable
period of time' fueled speculation in high-risk assets. The byproducts
of the speculation are the wealth effect on consumption in the US and
cheap capital-fueled investment boom in China-the twin engines or
bubbles, depending on your perspective, for the global economy today.
The cycle will end with either the Fed reversing its policy-we saw a
glimpse of it in its decision last week-or a financial accident from the
high-leverage that has been built up in high-risk assets everywhere in
the world. History would not be kind to the Fed; its accommodation and
even encouragement of speculative excesses would be viewed as the
primary cause for the massive bubble in global economy today, of which
the consequences are yet to show.
China must tighten capital controls to slow down the inflow and achieve
a soft landing. It is the only viable option, in my view. If China
allows the inflow of speculative capital to remain at such a high level
for another year, a painful hard landing would become quite difficult to
avoid, in my view. The appreciation of China's currency, which many
advocate as the main means to cool the bubble, would only encourage more
speculation, as we saw in Southeast Asia. The resulting bigger bubble
would make a hard landing inevitable.
The Biggest Liquidity Bubble in History
---------------------------------------
East Asia saw the highest level of capital inflow last year; the
region's foreign exchange reserves rose by $234 billion more than its
trade surplus compared to an average of $26 billion in 1990s and 8.3
billion in 1980s. China and Japan were the focal points for the inflow;
China's forex reserves rose by $117 billion vs. its trade surplus of
$25.5 billion, and Japan's by $204 billion vs. its trade surplus of $89
billion. Contrary to the popular perception, the rapid increase in East
Asia's foreign exchange reserves last year reflected capital inflow
rather than trade surplus.
Exhibit 1
Increase in Forex Exchange Reserves Minus Trade Balance
(US$ per annum)
-----------------------------------------------------------------
East Asia China Hong Taiwan Korea Southeast Japan
Ex-Japan Kong Asia
-----------------------------------------------------------------
1980s 8.3 4.7 2.9 -2.1 0.6 4.4 -36.6
1990-96 62.8 8.0 14.5 -8.3 10.9 37.8 -73.5
1997-00 -38.3 -19.1 22.9 -3.5 -0.8 -37.7 -63.4
2001 -14.6 23.5 15.0 -0.2 -2.7 -50.1 -13.7
2002 51.0 43.6 8.5 21.4 8.3 -30.6 -11.4
2003 118.8 91.5 15.0 28.0 18.4 -34.0 114.8
-------------------------------------------------------------------
Source: CEIC and Morgan Stanley.
The trend began in 2001 when the Fed cut interest rate aggressively;
China's forex reserves rose by more than its trade surplus for the first
time since 1996. The inflow kept accelerating and reached an
unprecedented scale last year.
We can rule out foreign direct investment ('FDI') as a cause for the
inflow. China's FDI last year last year was the same as the year before
and Korea's declined. Indeed, FDI has declined in China for the past
five months partly in response to the excesses created by the strong
capital inflow, such as rising commodity prices due to the property
boom.
Equity portfolio flow appears to have played a major role. Korea, for
example, experienced a new inflow of $17.4 billion in the first eleven
months portfolio investment. Taiwan received $2.4 billion in net inflow
of equity portfolio investment compared to $6.1 billion outflow in the
preceding year during the same period.
Normal portfolio flow, however, doesn't explain what occurred to China
and Japan. China has a closed capital account. Its FDI didn't
increase. And its QFII for the inflow of foreign flow into its stock
market is negligible. Speculative capital, mostly controlled by
overseas Chinese and China's nouveau riche, punting on China
appreciating its currency is the dominant source of China's capital
inflow.
Overseas Chinese control, in my estimation, $2 trillion of liquid assets
that can be mobilized instantaneously to punt in anything from European
football games to Shanghai property. This source of money is both the
boon and bane for China's economic development.
In Japan's case, it is mostly its exporters that caused so much capital
inflow. Because the US interest rate declined so much, Japanese
exporters expected yen to appreciate and rushed to log in the current
exchange rate.
Throw Away the Textbooks
------------------------
Unlike other developing countries, China can tap into this vast pool of
capital to develop its economy; all it needs to do is to create some
sort of excitement and the money rolls in. But, the ensuing enthusiasm
usually turns into a bubble that makes macro management difficult. How
to manage the speculative drive of the overseas Chinese is the key to
China's successful development.
It is highly dangerous to deal with China's macro challenges by reading
too much into the established macroeconomic models. Economic
development is an irrational process full of boom-burst cycles with
speculative drive at the center. Without speculative enthusiasm, who
would pile up capital in a poor developing country? It is the allure of
big bucks-the lottery psychology-that turns people into speculators or
entrepreneurs and brings capital formation to a particular country.
Successful economic development is a self-fulfilling process. China is
now the focal point of capital formation in the world because overseas
Chinese control so much capital and can operate in China with relative
ease.
Contrary to orthodoxy, flexible exchange rate destroys economic
development. No country has achieved successful development with a
flexible exchange rate, because speculative enthusiasm quickly turns
into a strong currency, which kills capital formation. China should not
and, in my view, will not fall for the so-called orthodoxy to embrace a
flexible exchange rate that would make its economic development very
difficult or even impossible.
The most difficult part of a development process based on animal spirit
is how to tackle with too much enthusiasm. During a century of
industrialization in the United States, a business cycle usually ended
with a financial crisis, followed by excess capacity and deflation.
China cannot afford that; the resulting instability would be too costly
for China. Thus, it must take actions before enthusiasm goes too far.
Capital Controls Are The Only Way Out
-------------------------------------
Most pundits would advocate currency appreciation to deal with the
strong capital inflow. That would be a big mistake. Capital markets
may be efficient relative to current market expectations. But these
expectations are often irrational like now. Perfect foresight, which
efficiency market theory predicates on, is a joke, in my opinion. The
massive swings in capital flows in Asia could only be explained by the
speculative drives that rise or ebb with some stimulus. The stimulus is
usually the Fed policy change. If Asian governments counter such
speculative sentiments by moving their currencies, it would create so
much volatility that capital formation would become difficult. This is
why Japan, a mature economy, can allow its currency to fluctuate more
other Asian countries and China, the poorest economy in the region, must
fix its exchange rate, and other economies, such as Korea and Taiwan,
behave between the two.
Capital controls, in my view, are the most powerful tool to moderate
business cycles. When China has too little money, arrest the people who
take money out; when China has too much money, arrest the people who
take money in illegally. This mechanism is the most effective tool to
manage China's macro economy.
Andy Xie (Hong Kong)
--------------------------------------------------------
This is not an offer (or solicitation of an offer) to buy/sell the securities/instruments mentioned. Morgan Stanley may deal as principal in or own or act as market maker to securities/instruments mentioned or may advise the issuers. This may refer to a research analyst/research report. For additional information, research reports and important disclosures, contact me or see https://secure.ms.com. We do not represent this is accurate or complete and and we may not update this. Past performance is not indicative of future returns. This communication is solely for the addressee(s) and may contain confidential information. We do not waive confidentiality by mistransmission. Contact me if you do not wish to receive these communications. In the UK, this communication is directed in the UK to those persons who are market counterparties or intermediate customers (as defined in the UK Financial Services Authority's rules).
作者：游客 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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