What is Hard Currency?

Hard currency is the symmetry of "soft currency", also known as coins. It has three meanings: Refers to metal currencies, such as gold, silver and their coins. Refers to currencies with good international credit, stable currency value and firm exchange rate. In today's world, due to differences in economic and technological levels and different macroeconomic policy orientations, inflation levels in different countries are often different, and the balance of payments and foreign exchange controls also vary widely. When a country's inflation rate is relatively low and its balance of payments shows a surplus, its currency value is relatively stable and the exchange rate is firm. It is customary in the international financial markets to refer to the country's currency as "hard currency (currency)" or "strong currency." It means that after the Second World War, some foreign currencies in the international financial market were not subject to foreign exchange control, and they could freely and unrestrictively exchange gold and other national currencies, such as the US dollar, British pound, German mark, etc. In addition, currencies with relatively strong exchange rates in the international financial markets are also called hard currencies. The characteristics of hard currency are: without the approval of foreign exchange management authorities, free export of national borders, free exchange of gold or currency of other countries, and payment to third countries. Therefore, these hard currencies can serve as international currencies in the international reserves of countries The proportion is relatively large. Because hard currency is highly convertible, it is generally accepted and the exchange rate is relatively stable. Therefore, countries are willing to export a larger amount of goods to countries that pay with hard currency. ^[1]

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Hard and soft currency

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RMB symbol

Renminbi symbol China and South Korea signed a currency swap agreement (December 12, 2008). This agreement is the first time that the People s Bank of China has signed a local currency swap agreement with other central banks since the financial crisis. The first step to going abroad. It is not only an increase in China's international status, but also a reflection of China's influence on the world economy. It will not only promote the development of China's border trade, but also reduce the exchange rate risks faced by enterprises' overseas investments. More importantly, it affirmed the inevitability of this trend of RMB becoming a hard currency in Asia.

The trend of the RMB becoming a hard currency in Asia is inseparable from China's economic development and reform achievements. The RMB has been freely exchanged and partially circulated in Hong Kong. China's currency in some overseas countries and even in the United States has exceeded 10 billion yuan, indicating that the confidence of the RMB in the international community is continuously increasing, all of which combined with China's continuous development , Become a powerful force to promote the renminbi into a regional hard currency.

Becoming a "regional hard currency"

One of the goals of the RMB settlement pilot for cross-border trade is to make RMB the regional settlement currency. From the change of a country's currency to the regional settlement currency, this role transition of the RMB can be said to be a natural one.

In the two financial crises that erupted at the end of the twentieth century and the end of the first decade of the twenty-first century, the renminbi assumed too much international morality, so that our export-oriented enterprises were burdened with heavy burdens.

When the Asian financial crisis intensified in 1997 and beyond, the yuan chose to strengthen; in 2007 and after the subprime crisis gradually evolved into an international financial crisis, the yuan still chose to stabilize.

On December 16, 1997, then-President Jiang Zemin attended the "China-ASEAN Summit Official Meeting" held in Kuala Lumpur, Malaysia, saying that China takes a positive attitude towards strengthening East Asian financial cooperation and China will not devalue the Renminbi for the benefit of the region. Financial order is stable. Since then, Chinese leaders have solemnly promised on various occasions that "the yuan will not depreciate"!

Regarding the current difficult situation for domestic export-oriented enterprises caused by the intensifying international financial crisis, the RMB has not depreciated.

When answering questions from foreign journalists during the 2009 two sessions, Premier Wen Jiabao of the State Council emphasized, "Our goal is to keep the RMB's currency basically stable at a reasonable and balanced level. However, this is up to us. No country can appreciate the RMB Or put pressure on devaluation. "

In fact, since the reform of the RMB exchange rate in July 2005, the RMB has appreciated by 21% against the US dollar. Especially since 2009, although the depreciation of the renminbi against the U.S. dollar has not been that great, due to the sharp depreciation of European and Asian currencies, the renminbi is actually in a state of appreciation. This has brought tremendous pressure on China's foreign trade exports.

6.8367, this is the exchange rate of RMB against the US dollar on the first trading day of 2009; 6.8309, this is the exchange rate of RMB against the US dollar on July 2.

From the point of view of numbers only, since the beginning of the year, the RMB is still in a state of appreciation. During the same period, the dollar chose to depreciate.

Judging from the performance of the two financial crises, some regional economic powers have not shouldered the heavy task of maintaining regional stability. In order to protect their own interests, they frequently devalue their currencies or take other "self-protection" measures. These actions have caused great damage to neighboring countries struggling in the financial crisis, and are not conducive to regional economic and financial stability.

In fact, it is precisely because the renminbi is willing to undertake international morals. In some neighboring countries in China, the renminbi has become a "hard currency."

From the above facts alone, it is not excessive to say that the RMB has become a regional settlement currency. ^[2-3]