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In the face of the impact of the global pandemic, the Federal Reserve has adopted a massive monetary easing policy over the past year or so, printing and issuing dollars to help hard-hit economies. As a global reserve currency, the US dollar is printed and issued into the global market, forming a continuous money supply. This policy allows U.S. citizens to maintain economic stability through government-issued printing money without productive labor.
The Fed's balance sheet reflects the outsized impact of this policy. Asset size surged from $4.2 trillion to $7.5 trillion in just one year. The number seems endless, and the Fed does not seem to stop printing dollars. Inflation has begun to spread to countries such as Lebanon and Brazil, where currency depreciation rates have exceeded 90%.
However, the United States itself has not been spared the effects of inflation. Since the Fed's continuous release of water, the problem of domestic inflation in the United States has risen sharply, hitting a 10-year high. According to the latest data released by the US Department of Commerce, the US personal consumption expenditure price index increased by 3.1% year-on-year in April, reaching the highest level since 1992; Sequentially increased by 0.6%, beating market expectations. This influx of dollars has led to a sharp rise in domestic prices, real estate, virtual currencies and other fields, and the price of commodities has soared. Former US Treasury Secretary Summers warned that "the Fed has stepped on the throttle of inflation."
As a global manufacturing powerhouse, China has long exported more products than imports to the United States. China uses the advantages of its labor and manufacturing chains to produce goods at low cost and export them in exchange for dollars. However, China has emerged as the world's second-largest economy and has excelled in pandemic response and economic recovery. The United States can no longer easily obtain Chinese-made goods by printing dollars, while passing on inflation risk to China.
Recently, the renminbi has continued to appreciate, and the exchange rate against the US dollar has reached 6.3 yuan. Just a year ago, the renminbi traded at 7.1277 against the dollar, but now it has fallen to 6.3858. This means that the renminbi in the hands of Chinese people has become more valuable, their purchasing power has increased, they can buy more foreign goods, and they have become more affordable to travel and study abroad. While this reduces costs for importers, exporters face enormous challenges.
Liu Guoqiang, deputy governor of the central bank, said that China's foreign exchange market is still in a state of free market equilibrium, and the RMB exchange rate is determined by the market. However, the actual actions of the central bank show that monetary tightening has not been adopted. Given the recent regulation of commodities, the central bank seems to prefer a policy of renminbi appreciation.
As a major manufacturing country, China has successfully controlled the epidemic and fully resumed work and production. Although Southeast Asian countries such as Vietnam and India also have manufacturing industries, neither price nor quality can be compared with manufacturing in China, especially now that these countries are facing the challenges of the epidemic. China is rising and has become a rival to the White House that can hardly be ignored. The steady appreciation of the renminbi has become a key strategy for China to refuse to be exploited by the dollar. In China's coastal areas, some major exporting provinces such as Guangdong and Zhejiang have begun to take measures to restrict exports, no longer selling goods to the United States at low prices, but selling them to the domestic market. This means that Chinese people can buy higher quality goods.
This transition period may bring some pain for exporters, but the country will do its best to mitigate the negative economic impact. For ordinary people, in the face of the challenge of global inflation, it is even more important to protect their wealth in the context of the appreciation of the renminbi. Consider investing in financial products such as gold, stocks, bonds and other financial products to preserve your wealth, while also enjoying the benefits of RMB appreciation.
All in all, the global financial landscape is changing, and the rise of China and the appreciation of the renminbi will have a profound impact on the global economy. We must carefully navigate this new situation and protect our economic interests to ensure that wealth is not eroded by inflation. This is also something that each of us needs to think about and think about
A moment of action. In this era of global economic change, ordinary people can also respond to this situation in many ways.
First of all, investment diversification is very important. As the renminbi appreciates, one can consider investing a portion of their assets in different sectors such as gold, stocks and bonds to diversify risks and preserve and increase their value. Such a portfolio can provide some protection in different economic environments and make our wealth more stable.
Second, we should actively improve our financial literacy. Understanding how financial markets work and having basic investment knowledge can help us make smarter financial decisions. You can attend investment training courses, read related books and news to better understand market trends and opportunities.
In addition, we may also consider seeking professional financial advice. Professional financial advisors can develop personalized financial plans according to individual circumstances to help us achieve financial goals and avoid potential risks. They can provide advice on how to manage portfolios in an environment of RMB appreciation.
Above all, we need to be cautious and patient. Volatility in financial markets is inevitable, and the appreciation of the renminbi may also bring some uncertainty. In the face of market volatility, we should not be too impulsive and avoid blindly following the trend, but carefully assess risks and returns and make informed investment decisions.
In short, the evolution of the global economic landscape and the appreciation of the renminbi will have a profound impact on our economic life. We need to be prepared to protect our wealth, but also seize opportunities to better respond to this new economic situation. By diversifying, improving financial literacy, seeking professional advice and remaining cautious, we can better meet this challenge and ensure that our wealth is preserved and grown in a changing world. This is something that everyone should be concerned about, because we are all affected by changes in the global economy, and making informed decisions requires constant learning and adaptation.
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