Extra number: 9.8 Teaching Chain Internal Reference " Sentenced to Prison for 10,000 Years ".
The long-awaited offshore RMB exchange rate USDCNH fell below the 7.3 mark and broke through the high of 7.36 overnight.
Why is 7.3 a critical threshold? Because this is the support level that was tested at the end of October and early November 2022 (from the perspective of CNH).
If the support level is broken down, it often means the strengthening confirmation of the market trend from a technical and psychological perspective.
This is one of the external manifestations of a strong dollar cycle.
When the Federal Reserve switches to a tightening policy, raising interest rates prompts U.S. dollar capital to flee from overseas markets and return to the United States, pushing up domestic U.S. dollar assets, such as U.S. stocks. The value of foreign assets declines due to liquidity flight (deleveraging); at the same time, the strengthening of the U.S. dollar makes The fall in foreign currency exchange rates caused the prices of foreign assets denominated in foreign currencies to suffer a Davis double kill.
The mission of the high-interest dollar is not only a great transfer of wealth from overseas to the United States, but also a vampire attack of the U.S. dollar on foreign currencies. The result will be harm to the economic growth of economies around the world other than the United States in the next ten years. (Refer to Liu Jiaolian's articles " Artificial Prosperity: The Great Transfer of Wealth ", " The Vampire Attack of the U.S. Dollar " and " Research Shows that U.S. Dollar Interest Rate Raising Harms the Global Economy in the Long-term ")
In 2021, according to data released by the National Bureau of Statistics, my country's GDP is 114.92370 billion CNY. According to the exchange rate, the contract is 17.82046 billion USD at a 6.45% discount. During the same period, the United States’ full-year GDP in 2021 was USD 23.31508 billion. Our country’s GDP is approximately equivalent to 76.4% of that of the United States.
When the epidemic just started in 2020, many media and analysts expected that China's economy would continue to grow for decades and its GDP ratio relative to the United States would continue to increase.
As you can see from the picture above, it was expected that by 2021, with the exchange rate devalued to 6.9, my country's GDP would reach a level equivalent to about 75% of that of the United States. Looking at the actual data for 2021 in hindsight, it can be said that the predicted values are still very close. However, the actual exchange rate in 2021 is not the expected 6.9, but 6.4-6.5.
The turning point occurs in early 2022. As the Federal Reserve begins to aggressively raise interest rates, the U.S. dollar exchange rate continues to strengthen.
When we look back in 2023 to calculate the GDP comparison in 2022, something has happened that surprised many experts: the gap between China and the United States has not narrowed further, but has widened!
In 2022, my country's GDP will be 121.02072 billion CNY. According to the exchange rate, the contract is 17.96317 billion USD at a discount of 6.74%. During the same period, the U.S. GDP was 25,462.7 billion USD. my country's GDP has dropped to 70.5% relative to U.S. GDP, a drop of nearly 6 percentage points compared with 2021.
This gap is still showing a widening trend.
By the first half of 2023, my country's GDP statistics will be 59.30342 billion CNY. At an exchange rate of 7.14%, the contract is 8.3 trillion USD. During the same period, U.S. GDP statistics were 13.2447 billion USD. my country's GDP has further dropped to 63% compared to the United States.
From 76% in 2021, it fell to 63% in 2023H1. After a year and a half of interest rate hikes by the Federal Reserve, the GDP gap between China and the United States has widened by 13%.
This makes the author once again recall what Soros said when he met with Premier Zhu that year: China should avoid repeating the mistakes (of Japan). He criticized Japan at that time, saying, "As much industrial output as there is financial loss." (See Liu Jiaolian's article " China's Deleveraging ")
Ultimately, this is a game between labor and capital. It is unfair that we are immersed in production, working hard, and creating wealth and value, only to be snatched away by the fingers of the visible hands that control financial capital and monetary hegemony.
Extra number: 9.8 Teaching Chain Internal Reference " Sentenced to Prison for 10,000 Years ".
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