Has Asia's economic situation become precarious again? When some authoritative institutions crack down on the renminbi one after another, will we repeat the mistakes of the 1997 Asian financial crisis?
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Currency markets are surging again, and Asia seems to be in the midst of a flurry of exchange rates once again. Just when the eyes of the world are focused on the Middle East, a seemingly smokeless battle is quietly unfolding in the Asia-Pacific region. The U.S. dollar has been on the offensive very fiercely, and the currencies of countries such as Japan and South Korea have fallen sharply, and the exchange rates of countries such as Vietnam and Indonesia have hit record lows. Even India, an emerging economic powerhouse, is in jeopardy. Is this yet another conspiracy by the United States to look for an opportunity to "harvest Asia"?
If this is the case, will the renminbi become the last "straw" for Asia? Will we be able to withstand the test in this "currency defense war"?
In fact, a few months ago, some of the comments of Fed Chairman Jerome Powell became the trigger. He hinted that the Fed would not rush to cut interest rates and might even raise them. This is undoubtedly a huge shock to the Asian market.
The U.S. dollar then surged in, pointing directly at the currencies of many Asian countries. The yen fell sharply, breaking through the 154.5 mark for the first time in 34 years, and the won was overwhelmed, falling to the 1400 mark. Emerging market countries such as Vietnam, Indonesia, and India have been losing ground under the impact of the US dollar, and their currencies have continued to hit record lows.
In the face of such a powerful "monetary offensive", Asian countries have done their best to save themselves. The Indonesian government even intervened in its own right, selling off bonds in large quantities and narrowly halting the collapse of the currency. But other countries have no choice but to seek outside help.
It is important to know that these countries are usually export-oriented economies with high external debt and insufficient foreign exchange reserves. If the national currency depreciates, while it may temporarily boost exports, the surge in import costs will also greatly offset this benefit. To make matters worse, their main export markets are precisely developed countries such as the United States and Europe.
Therefore, the surge in the dollar is tantamount to a "death strangulation" against these countries. What is even more worrying is that commodity prices are also rising in tandem, which is undoubtedly "adding insult to injury" for these major exporters of manufactured goods. With the monetary situation in Asia precarious, the tragic situation of the 1997 financial crisis seems to be repeated.
It is reassuring to note that the renminbi has shown surprising resilience at a time when countries are losing ground. Although it briefly fell below the 7.2 mark, it quickly stabilized its position and remained at a reasonable level of around 7.25. For those Western authorities who are accustomed to "waiting for an opportunity" for us, this "unusual" performance of the renminbi clearly surprised them.
As a result, some institutions have downgraded China's credit ratings one after another, and some banks have even launched a desperate marketing strategy of "high-interest savings". Their purpose is self-evident, that is, to do everything possible to plunge the renminbi into financial chaos, thereby dragging China into a "storm" of exchange rates.
However, they overestimated their means after all. After years of trials and hardships, China's economy remains rock-solid. We are no longer the "backward country" of the past, but have become the "lifeblood" on which many Asian countries depend.
ASEAN countries have become China's largest trading partners. In this "currency war", China is rightfully on the front line of Asia. We have not only taken the initiative to sell US Treasury bonds on a large scale, but also actively extended a helping hand to Indonesia and other countries to ensure the economic stability of our neighbors.
In fact, the "fierce blow" of the United States to Asian currencies this time has exposed its own anxiety and helplessness. The Federal Reserve has already borne the heavy burden of $34.5 trillion in national debt, and where will there be more room to keep raising interest rates? If it does not take advantage of the current frenzied "squeezing" handful, I am afraid that the hegemony of the dollar will not be able to maintain for long.
As a result, the renminbi is acting as the "last barrier" for the entire Asian region's economy with an unexpected amount of willpower. With the persistence of China, the currencies of Asian countries are not destined to suffer the "catastrophe" as they did in 1997. In turn, this solid local market will also add luster to the internationalization of the RMB.
In other words, this is undoubtedly a contest of financial power between China and the United States. Whether China can withstand the impact of this "storm" is crucial to the international status of the renminbi. Of course, this is just a new beginning, and there are many more challenges ahead of us. However, after this "baptism of actual combat", it is believed that the renminbi will be able to rejuvenate itself and continue to march towards the lofty position of the world's central bank currency.