What are the benefits of pegging to the dollar?
One of the most significant benefits is the elimination of uncertainty. For example, an enterprise may produce well and its products sell well in foreign markets. However, the exchange rate suddenly changes, and the originally profitable enterprises may turn into losses.
If the production cost of a certain product is 8 yuan RMB, according to the exchange rate of 1 USD1USD, every product sold by the company in the United States could have been exchanged for1USD, and the profit rate is about 25%.
However, if the exchange rate suddenly changes to 8 yuan RMB exchange rate 1 USD, every time an enterprise sells 1 USD, it can only be converted into 8 yuan RMB, with a profit rate of 0%.
If the exchange rate is always 1 USD = 10 RMB, enterprises need not worry about the impact of exchange rate fluctuations. Therefore, enterprises do not want to see exchange rate instability. A stable exchange rate can bring a better production environment to enterprises.
-What problems might the dollar peg bring?
The allocation of resources is determined by the market, and the exchange rate is a special commodity. Although we take Chinese cabbage as an example, the exchange rate cannot be completely equal to Chinese cabbage after all.
The essence of pegging the dollar is to implement price control in the foreign exchange market, which will inevitably lead to resource mismatch.
Pegging the dollar may reduce the uncertainty of enterprises' exports to the United States, but it may also increase the price uncertainty of exports to other countries, such as exports to Japan.
For example, the original exchange rate of USD/JPY is USD 65,438+0, which is equivalent to JPY 65,438+000. If the exchange rate of USD/JPY changes, it becomes 1 USD, which is equal to 140 JPY, with an appreciation of 40%. Since the RMB is pegged to the US dollar, the RMB has also appreciated by 40% against the Japanese yen.
Under such circumstances, the goods exported to Japan with the price of 100 yen can be exchanged for 6.2 RMB, but now they can only be exchanged for 4.43 RMB due to appreciation. In this way, enterprises will be damaged and exports to Japan will be reduced.
China not only exports to the United States, but also exports to other countries. Therefore, pegged to the dollar eliminates the uncertainty of exports to the United States, and at the same time, due to the frequent changes in the exchange rate of the dollar against other countries, it increases the uncertainty of exports to other countries.
Pegging to a basket of currencies or the exchange rate system of a basket of currencies is to alleviate the negative impact of the above problems.