In the face of strong pressure, it is not easy for the China government to deal with it properly. However, we didn't listen to the American advice, let alone give in to the pressure of the American government. We must stand in the highest national interests of China, calmly face challenges and make prudent decisions.
First, China must confidently use the theoretical logic of economics and a large number of historical facts (data) to analyze the specious reasons why the United States suppressed RMB appreciation.
Second, China must quickly determine the basic principles of RMB exchange rate policy, such as continuing to stabilize the RMB exchange rate to 8 RMB 1 or 7.8 RMB 1. At present, the so-called "small step and quick run" appreciation strategy will only further strengthen the expectation of RMB's sustained appreciation and aggravate the potential crisis factors of China's economy. Once the expectation of appreciation changes, the consequences will be the bursting of the asset price bubble and the financial crisis.
Thirdly, it must be recognized that according to China's current financial openness and the development stage of its own economy, especially the financial market, it is not only the best choice but also feasible for China to maintain a fixed exchange rate between RMB and USD. To maintain a fixed exchange rate between RMB and USD, we don't have to rely on the United States, just take the world's most important reserve currency as the benchmark of monetary policy. Maintaining a fixed exchange rate between RMB and USD is beneficial to China's monetary stability, trade growth, foreign direct investment, international settlement and China's overseas domestic investment. The biggest risk is the instability of the dollar, but this is the smallest risk. Because it is unlikely that the United States will repeat the mistakes of 1970' s, and it will do no good to the United States itself by aggressively expanding its currency, engaging in inflation and making the dollar unstable.
Fourthly, China must properly manage its foreign exchange reserves. In fact, the key to the problem is not how much foreign exchange reserves are, but how to manage them. It is obviously inappropriate to rely too much on buying US Treasury bonds. China should seize the opportunity to purchase oil, precious metals (including gold), minerals, forests and other resources in large quantities, diversify the investment risks of foreign exchange reserve assets, and appropriately increase monetary assets such as euro as reserve assets. Huge foreign exchange reserves are not only huge economic resources, but also an important tool for financial diplomacy.
Fifth, China must carefully grasp the strength and rhythm of financial opening, especially the strength and rhythm of financial market opening. The key point is to resist the coming and going of international "hot money" or speculative funds. China's financial industry and financial market are still very underdeveloped, and its supervision ability is very backward, so it is totally unable to resist the speculative impact of international hot money. Most importantly, China does not need international hot money speculation at all. What it needs is real investment (foreign direct investment) to build enterprises, solve employment problems, introduce advanced management and technology, upgrade China's technical level and accumulate human capital.