Both are needed, but even the omnipotent central bank cannot achieve that. The inability to stabilize the depreciation of the RMB exchange rate is proof of this.
On one hand, the central bank needs to maintain a loose monetary policy, timing interest rate cuts and reserve requirement ratio reductions; on the other hand, the central bank needs to stabilize the exchange rate and cannot allow the RMB to depreciate into a trend. These two are contradictory. If the central bank had unlimited resources, it could indeed balance both. However, the actions of the central bank illustrate that its resources are limited, and it can only focus on one aspect, not both.
Strategies only make sense when resources are limited. If resources were unlimited, it would naturally be both. With limited resources, priorities must be set, and choices must be made. Currently, it seems that the central bank's resources are limited, with a focus on monetary easing rather than strictly maintaining the exchange rate.
The central bank's stance is not about the firmness of its statements, but about actual actions. First, the onshore RMB exchange rate has already approached 7.33, far exceeding the leadership's psychological price, and there is no resistance. Second, the key indicator of the central bank's actions, the one-year foreign exchange swap, has left foreign investment in Chinese government bonds with a risk-free arbitrage of only a few basis points, almost no profit, indicating that the central bank has given up on intervention. Finally, the central bank still needs to be somewhat stern in its rhetoric, warning foreign exchange "speculators," just like it warned bond speculators last time, only to turn around and buy over a trillion in government bonds itself.
Due to the long-term implementation of the one-child policy, the number of potential rescuers in China has decreased rapidly, far exceeding Japan's situation back then. So why do you still expect that after three years of adjustment, Chinese housing prices will stabilize?
Some may say, I know housing prices might fall in the future, but what should I do with all this money if I sell my house?
Should I— Sell my house and invest the money in the big A-shares, which treat investors as the "only premium asset"? Or buy Chinese government bonds or corresponding wealth management products with a yield of only 1.6%, while having to endure fluctuations in their net value?
Of course not.
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