Yuan Depreciation: Buy A-Shares and Gold
Former State Administration of Foreign Exchange Balance of Payments Division Guan Tao says:
In fact, the current level of the RMB exchange rate is overvalued or undervalued from a different point of view is not the same. For example, from a trade perspective, we (the Chinese) are still relatively large trade surplus, exports more competitive, so the RMB exchange rate is not overvalued, which is more agreeable to the official advice. But if from the financial point of view, especially in the current economic downturn more than discussion, external dollar, the information market volatility is relatively large, relatively large mood swings, there is more money in circulation, from this perspective, we may find short-term the yuan has been overvalued.
He later says:
Where monetary policy is concerned, when faced with steady growth and stable exchange rate conflict, as once said Zhou Xiaochuan, the country should give priority to the domestic economy, the monetary policy should give priority to steady growth, rather than the exchange rate stable, but I am not saying that the exchange rate stabilization objective can not. It is possible to pick two, the question of the stability of the exchange rate can use another tool to solve, but monetary policy should be based on steady growth priority.
China will choose growth over a stable exchange rate. In light of depreciation risk, GUan Tao is buying A-shares and gold:
Guan Tao: I think we are very concerned about this issue – now my own financial management is mainly what? I still feel familiar to you to buy some products, domestic financial aspect, I mainly bought some stock funds. I think the Chinese (economic) transformation and upgrading there are still many opportunities for the Chinese stock market after last year’s adjustment, relatively speaking more fully packed foam, plus there are a lot of structural opportunities. This year, I configured a number of industry stocks, has until now returns 10 to 20 percent, people may feel that economic studies only make so little money, but I have been very satisfied, can hedge against RMB dollar risk.
Reporter: Can you disclose what industry do?
Guan Tao: Buy some green, entertainment, sports and culture (industry shares), which are part of the concept of consumption upgrade, the next step China to engage in “Beautiful China”, belonging to the ecological environmental protection concept, there are some opportunities. Now the process of international financial risk is still being released, there are many uncertainties, so chaotic city configure some relationship with gold financial assets it is also quite good. I did not buy physical gold, just bought some gold ETF , gold stock fund category, this year’s income is also good. Of course, everyone’s different risk preferences, I am not against you to configure some of the foreign assets, but the key is to understand what you are buying, not just because of fear of possible exchange rate depreciation (away investment). We also see that many of China’s big last year spent so much money to take England to buy a house, but who thought of the British referendum will pass it off to Europe?