Renminbi strong enough to withstand currency war

From a long-term perspective, the US dollar may maintain a strong momentum against emerging countries' currencies for quite a longtime, but it will be difficult to do the same against the renminbi. China now maintains a continuous trade surplus and it continues to expand. The US economy is deeply mired in a disease of the apparent causal relation ship between the increase in the economic development of a specific sector and a decline in other sectors, and its "re-industrialization" campaign as part of its plan to reconsolidate its real economic foundation will be difficult to maintain.

Instead, the balance of its trade in goods is worsening despite its economic recovery. From 2011 to 2013, the growth of US' exports was faster than that of its imports, which to some extent improved its trade in goods balance. But starting from 2014, the trend reversed, as its exports growth again exceeded its imports growth, and the gap has continued to widen. Experiences from several dollar crises since the 1960s indicate that an ever-worsening trade balance and current account and fiscal deficit will cripple market confidence in the dollar. The latest round of a strong dollar against the renminbi will be interrupted by the Triffin Dilemma (where by the US needs to run balance of payments deficits that undermine confidence in the dollar as are serve as set) and this is expected to occur sooner rather than later.

From another perspective, the war declared by Soros on Asian currencies will offer an opportunity for China to deepen financial and fiscal cooperation with other East Asian countries, and cooperation on the China-led Belt and Road Initiative. Currently, East Asian currency cooperation basically stays at currency swaps or other forms of low-level cooperation.

In the context of drastic currency market fluctuations in emerging markets and Soros' open hint of a speculative attack against them, it is expected that China an do the remerging Asian economies will strengthen their financial cooperation, such as coordination and cooperation on monetary, financial and fiscal policies.

The author is are searcher at the Ministry of Commerce's International Trade and Economic Cooperation Institute.