RMB Value Preservation and Balance of Payments Surplus: The Bottom Cards and Dilemmas of the CCP's Economic Strategy
The possibility of a major devaluation of the RMB over the next 10 years is low, unless China begins a forced unification, conflicts with the United States in the Western Pacific, and thus leads to comprehensive sanctions from the West.
Everything for exports—this was a "national policy" of the CCP during the Three Years of Great Famine. The government did not hesitate to let the people starve to death to fulfill import and export contracts. In the two years from 1959 to 1960, 6.8 million tons of grain were exported, and the foreign exchange obtained was used to import machinery and equipment, purchase raw materials and fuels, provide foreign aid, and so on.
Everything for exports is even more important now. The balance of payments surplus is too important for the CCP regime, more important than GDP growth rates, fertility rates, local finances, and the sustainability of medical and social security.
The balance of payments surplus puts the CCP regime in a favorable position in the global economy, representing the international solvency of the CCP regime, and also providing opportunities to attract overseas investment, allowing foreign capital to enter with confidence without worrying about being "harvested"... With money in hand, the CCP regime has status internationally and confidence in great-power diplomacy. This is also what the common people value; they are willing to eat gutter oil as long as the country is strong, as this brings "face."
Having "face" means having legitimacy.
For the country to have "face," the government will never allow a major devaluation of the RMB; otherwise, the confidence of the citizens will collapse, causing severe capital flight. Chinese people have not seen the world, cannot withstand failure, and have poor psychological resilience, unlike the Japanese. The Japanese lost the Pacific War, experienced the real estate collapse of 1990, and the yen has depreciated nearly twofold over the past 10 years. Through the ups and downs, the people's hearts did not scatter, but China is different. At the slightest sign of trouble, people panic and scatter like birds and beasts.
If GDP growth data is poor, the Bureau of Statistics can find a way;
The long-term low fertility rate will cause a population collapse. Although it cannot be reversed, the consequences will appear in 20-30 years. Currently, China still has a structural surplus of labor.
When medical and social security run out of money, the "leeks" can be left to fend for themselves. If all else fails, there are armed police and the army for stability maintenance, and the "leeks" can be given generic drugs or herbal medicines...
When local finances run out of money, they can be left to find their own ways to scrape the land...
But the only problem China cannot solve is that the central bank cannot print hard currency; what it prints is paper; what the Federal Reserve, the European Central Bank, and the Bank of Japan print is money. Therefore, a balance of payments surplus is essential. If exports fail, then imports must be reduced; imported medicines are removed from medical insurance. In short, the surplus must be maintained at all costs to obtain US dollars.
The CCP regime also does not intend to make the RMB freely convertible. Chinese society is a controlled society, and the economy must necessarily be a controlled economy. Financial reform would shake the foundations, so what should not be changed will absolutely not be changed. Under the trend of long-term economic decline, domestic investment opportunities are decreasing. Money, like commodities, wants to run away. China has completely missed the window of opportunity for financial reform; therefore, the internationalization of the RMB is just a trick to fool idiots and is forever impossible.
In the future of China, whoever can export to exchange for US dollars will be powerful, and whoever has the channels to move money out will be powerful. It is as simple as that.