| Currency is a commodity, also has value. The internal value of the unit of currency is reflected in its exchange value of goods and services that it can buy, the external value of the unit of currency is reflected in its ability to buy foreign goods and services, which can use the exchange rate to foreign currency to represent. Internal value and external value reflected in the purchasing power of more goods and services. The more domestic goods and services it can purchase, the greater internal value it has, and the purchasing power is inversely proportional to inflation. The more foreign currency it can exchange, the more foreign goods and services it can purchase, the greater external value it has, and the foreign purchasing power is proportional to the indirect quotation of the exchange rate. In this paper, the internal value of RMB is defined as the purchasing power of domestic goods and services, use CPI (Consumer Price index) to represent and is inversely proportional to CPI.The external value of RMB is defined as the purchasing power of foreign goods and services, use NEER((Nominal Effective Exchange Rate) to represent, and is proportional to NEER.Traditional economic theory, such as purchasing power parity theory and the international balance of payments adjustment theory tells us that the direction of the change of internal value and external value should be identical. Internal imbalance of a country’s economy, such as domestic internal devaluation due to inflation rising prices, the public will transfer the demand for domestic goods expenditure to the demand for foreign goods spending, this process will increase the demand for foreign exchange to improve the value of foreign currencies, then the internal value and external value of the gradually approach and will be consistent; external imbalances of a country’s economy, such as the appreciation of the local currency that is caused by the balance of payments surplus, which will reduce the cost of imports of foreign goods, the demand for public spending will shift from domestic goods to foreign goods, and reduce their commodity prices, increasing the purchasing power of the domestic currency, increasing the internal of the local currency do, then the internal and external value of the currency will be close and consistent. But, most time of last decade, changes in the value of RMB is reflected as the deviation of the decreasing internal value and the increasing external value. Especially after the exchange rate reform in2005, the internal devaluation of RMB and external appreciation phenomenon coexisted, and china economic imbalances is growing. Internal imbalance manifests in hot economic increasing inflation increasing good price and increasing asset price (Although these two years they have lessened under the administrative control).External imbalance manifests in expanding trade surplus under current account, a larger number of inflowing international capital and rapid accumulation of foreign exchange reserves.Changes in the monetary value of the international experience tells us that the currency of many country has the appreciation of external and internal devaluation phenomenon in the high-speed development stage (such as:Korea, Japan, Thailand, Malaysia, the Philippines, etc.).Combined with the stage of development of China’s reality and the reality of the basic national conditions, under the context of China’s exchange rate reform, the global financial crisis, RMB appreciation expectations and quantitative easing policy under the condition of China’s gradually disappearing demographic dividend, rising prices of production factors, economic structure and economic growth pressure to transform,under the system of China’s capital control, not market-oriented interest rate, rigid foreign exchange management system, under the phenomenon of China’s macro-economic imbalances, how the internal and external value of RMB deviate and the internal reasons and external factors of the deviation are this article’s main issues to explore. |
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