Text | Lin groaned softly
Edit | Lin groaned softly
Sources: All statements in this article are based on sources believed to be reliable
Preface
After the turmoil in the value of the US dollar, European and American countries did not suffer any losses, but Asian countries such as China, Japan, and South Korea had obvious fluctuations in the value of their currencies and had to urgently convene a meeting to discuss countermeasures.
How will China, Japan and South Korea respond to the turmoil caused by the super-strong dollar?
The yen and the South Korean won bore the brunt
As of May 8, the South Korean won has fallen by more than 5.5% against the dollar this year, which means that the dollar is becoming more and more valuable compared to before, and the won is becoming less and less valuable.
The decline in the exchange rate of the South Korean won against the US dollar is not a matter of one or two days, and even the currencies of China, Japan and South Korea, only the South Korean currency has fallen the hardest, and of course they have also made some countermeasures.
For example, as of the end of April this year, South Korea's foreign exchange reserves have decreased by 5.99 billion US dollars, and it is not difficult to see that they have consciously reduced the amount of US dollars they hold, so as to better reduce risks.
Source: Global Network2024-05-09 "The super strong dollar causes turmoil, and the yen and the South Korean won bear the brunt! Currency depreciation prompts emergency response from many Asian countries》
South Korea and Japan make money on a very similar principle, their countries have strong production capacity, and the quantity and amount of products produced far exceed the purchasing power of their own people, so they can only rely on exports to consume their production capacity.
For example, South Korea has the world's advanced semiconductor and technology industries, and after these products cannot be consumed in their own country, they will inevitably have to export them abroad to make money, which is their advantage and also brings them a weakness.
Because South Korea mainly relies on imports from the United States and other countries to produce raw materials, when the United States raises the price of raw materials, South Korea will have to pay a higher cost to buy raw materials.
Especially after the Fed cut interest rates, even Americans themselves know that bank interest rate cuts affect commodity prices, and the more interest rate cuts are, the more dollars will circulate in the market.
As soon as there are more dollars in the market, the United States will usher in an increase in commodity prices, which will inevitably increase the pressure on the American people when buying goods.
But the interest rate cut is a means for the Federal Reserve to help the US government relieve debt pressure, which is also an important reason for the existence of the Federal Reserve, otherwise the United States would not have kept a useless Fed as an ornament, and it would have been withdrawn at the beginning of the last century.
This year, the total amount of US debt has risen to as much as $3.4 billion, and the Fed is easy to raise interest rates and cut interest rates, pulling the whole world into the water with the United States.
However, the currency value of European and American countries has not risen or fallen significantly because of the Fed's actions, but China, Japan, South Korea and other countries in the Asian region are silently helping the United States bear the pressure.
For example, in Japan, anyone with a discerning eye can see that the depreciation of the Japanese currency is inseparable from the appreciation of the US dollar, but in the past period of time, Japan's top management has simply mentioned that it wants to take action, but it has not really taken action.
Source: International Finance News2024-05-14 "The yen is falling wildly! The Bank of Japan finally made a move》
On May 8 this year, the governor of the Bank of Japan spoke out again, mentioning that they could not continue to watch the Japanese currency depreciate and that they had to do something to save the situation.
However, after the Bank of Japan governor and Fumio Kishida talked, the two sides did not discuss an effective way to solve the problem, and in the end, the Japanese top management only stayed at "concern" about the value of the Japanese currency, and did not say what they were going to do.
Japan's top leadership should calmly deal with the depreciation of Japan's currency, but the "Nihon Keizai Shimbun" could no longer sit still and pointed out the common problems of China, Japan, South Korea, and other Asian countries.
Asian currencies fight back
On the surface, Japan and South Korea are two countries that are relatively dependent on commodity imports, but in fact, all importing countries have the habit of importing a large number of goods from all over the world.
In other words, inflation in the United States and other countries is not only raising the price of imported goods from Japan and South Korea, but also raising the price of imported goods from China.
And we all know the consequences of rising commodity prices, that is, shirts that can be bought for only 50 yuan may cost 100 yuan or more to buy after the price of commodities rises.
On May 3 this year, China, Japan, and South Korea, which are jointly aware of these problems, held a meeting in Tbilisi, Georgia, to discuss what to do, and on May 6, the official website of the Ministry of Finance of the mainland also announced the general content of the meeting and discussion.
At this meeting, Japan, South Korea and other countries mentioned the key issues of 10+3 financial channels, and the so-called "10+3" refers to the three countries of ASEAN countries plus China, Japan and South Korea, mainly talking about the issue of dealing with risks.
Source: Ministry of Finance website2024-05-06 "Liao Min Attends ASEAN, China, Japan, and South Korea Finance Ministers and Central Bank Governors Series Meetings and Holds Multiple Bilateral Talks"
We all know that the currencies of Japan and South Korea are in a state that is not optimistic, while the state of the mainland currency and the currencies of Japan and South Korea is different.
On May 9 this year, the official closing price of the CNY against the US dollar was 7.2258, which is up from the previous period, but it is still down compared to the recent period.
Source: Financial Sector2024-05-09"On May 9, the onshore yuan closed at 7.2258 against the US dollar, up 3 points from the previous day"
In other words, the value of the renminbi is affected by the US dollar, sometimes the value of the currency rises, sometimes the value of the currency falls, but the stability of the value of the renminbi is the most important, so it is necessary for the mainland to talk about cooperation with countries such as Japan and South Korea.
Had it not been for Japan's proposal to intervene in foreign exchange at the end of May this year, the relations between Japan and the United States would still be relatively close, and it would not have thought of cooperating with China and South Korea.
Because in 2012, China, Japan and South Korea talked about cooperation and talked about the establishment of a free trade zone, and the significance of the establishment of the free trade zone is to help the goods of the three countries better sell in Asia.
Source: Free Trade Zone Connection 2014-12-01 "Japanese media: Japan rejects China-South Korea proposal, China-Japan-South Korea free trade agreement negotiations are deadlocked"
If nothing else, China, Japan and South Korea will be able to enjoy the benefits of the FTA in 2012, but the unexpected happens.
When the mainland and Japan were negotiating, it was clear that they had already given the greatest preferential measures, but Japan also said that the preferential treatment they enjoyed was not large enough, and decided not to establish a free trade zone with the mainland and South Korea.
After Japan expressed its position, the mainland wanted to negotiate with South Korea first, thinking that if South Korea agreed, it would be easier for Japan to negotiate, but South Korea and the mainland did not reach an agreement.
Regarding the China-Japan-South Korea Free Trade Zone, China, Japan and South Korea have talked about at least six rounds, and each round can encounter new problems.
In addition to China, Japan and South Korea talking about the construction of a free trade zone, China, Japan and South Korea also talked about the relationship between their national currencies and the US dollar in 2010.
In 2020, the Chiang Mai Initiative came into effect, and the main reason for the existence of this initiative is that China, Japan and South Korea have built a pool of funds, which has $243.5 billion.
Source: Jiemian News2020-06-23 "Bank of Korea: Chiang Mai Initiative Multilateralization Agreement Revised Agreement Officially Comes into Effect"
China, Japan and South Korea have a need, they can use their own currency to exchange the money in this pool, each country has a certain amount, to put it simply, China, Japan and South Korea have a place to borrow money when they are in financial difficulties, and now Japan and South Korea have a need for funds.
In addition, in order to protect their national currencies, all three countries have chosen to deliberately reduce the dollar in their hands, prompting the dollar to reduce its impact on the Asian region.
In the process of development, we should pay attention to the fact that the first rich lead the latter to become rich, and we must also know how to unite and extend a helping hand to others when they encounter difficulties, so that everyone can get out of the predicament as soon as possible.
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