Author: Rong ping source: official account: Rong Ping (id:rongping898) has been authorized to reprint
Third brother has an advantage, that is, self-confidence, especially self-confidence!
In the past, the purpose of the third brother was that China dared to do it, and he dared to do it. Now the third brother is more confident. He dares to do what China dare not do. Some time ago, inspired by the Russian Ruble settlement order, the Central Bank of India and the Reserve Bank jointly launched the rupee settlement mechanism for international trade.
The mechanism stipulates:
The exchange rate between rupee and other currencies is determined by the market. Indian Importers should pay in rupees according to the goods or services supply invoices of overseas sellers. At the same time, Indian exporters should obtain export income in rupees from the special account designated by the agent bank of the partner country.
To put it simply, India encourages enterprises to use rupees for international trade settlement as much as possible and collect certain financial benefits from them.
After the news came out, I immediately showed Chinese netizens hi.
India’s economy is indeed not very good, but its size and international influence here will more or less serve as a model for other countries. After all, even goods like brother three are OK. Why can’t I?
Coupled with the fact that the Federal Reserve has started the method of raising interest rates and refluxing, the international credibility of the US dollar is at a low ebb. If this continues, the global monetary system will soon enter an era of simultaneous rise, and the US dollar will not be far from falling on the street at that time.
Let’s not say yet. Although the third brother can’t do anything, he hasn’t been afraid of anyone in terms of courage.
Say fuck Lao Mei, stab him with a knife, and only stab him seven inches!
Some Americans complain, saying that you can’t do this, third brother. The US Japan India Australia alliance mechanism has just been upgraded to a quasi alliance, and you cut your eldest brother. How can you be your brother!
The third brother said, it’s just a brother!
Others are doing everything for their brothers, while the third brother is only doing everything for them.
In those days, China, Bhutan, Nepal and Myanmar, who were brothers to India, have not been stabbed by him?
I’m embarrassed to pat my chest and tell others that I’m the brother of the third brother without being stabbed by him!
According to the script development, after watching the excitement of perfect dog biting, it’s time to laugh at the third brother daily.
International settlement currency is not so easy to do!
Money itself does not have any value. Its value depends on its sovereign state. Therefore, if any currency wants to develop into an international settlement currency, the key depends on whether the country can provide what most countries want. We call it a currency anchor.
The stronger the rigid demand of anchors, the larger the trading share of currencies in the international settlement market.
Why can the US dollar monopolize 40% of the trading share? That is because its sovereign state, the United States, can provide three kinds of anchors at the same time.
First, oil, known as the blood of industry, is indispensable to any country that wants to engage in modernization.
Second, the military, from the colonial era of great navigation to the globalized information age, security has always been the most scarce international public goods. The reason is simple: in the order set by the west, the international community still follows the law of the jungle of the jungle. In such a big environment, few countries can be alone. They have only one choice: to attach themselves to the system of a big country and seek safety shelter.
Although Washington acted irrationally, it also scraped people’s fat everywhere. However, it is undeniable that after the Soviet Union farted, the United States became the only country with strength and willingness to widely provide this international public goods, which is also the core factor why there are so many U.S. allies.
Third, finance. The United States has a complete financial transaction system, covering all fields of international transactions from clearing to message remittance. Enterprises engaged in import and export trade will save a lot of trouble by using its system.
The euro can become an international settlement currency, and the anchor is the high-end manufacturing industry with weak substitutability, as well as the unified finance of more than 20 countries. The yen can become an international settlement currency, and the anchor is Japan’s largest overseas asset in the world.
RMB can become an international settlement currency, and the anchor is China’s status as the world’s largest exporter of infrastructure and industrial manufactured goods.
As for the new ruble, it depends on the binding with oil and gas resources to make it have a hard pass attribute!
What does India have?
There are no resources, no industry, no power, and a typical three no country. What does the third brother take to endorse the internationalization of Rupee? Take Henghe river or flying cake?
The most important thing is that India’s domestic economy is unstable and the exchange rate is poor. Others charge you 100 rupees today and can only buy 50 rupees tomorrow. Who dares to charge it?
To sum up, the third brother’s decision to internationalize rupee is entirely up to you and me!
Everyone must have the same idea, right?
Smaller, smaller pattern!
In the past few years under the rule of modi immortal, although the third brother failed in the end, the logic behind every time he worked was very beautiful.
India’s primary solution to the internationalization of the rupee this time is to prevent Sri Lanka from becoming an international country!
In essence, India is an enlarged version of Sri Lanka. Most goods need to be imported. Last year, the trade deficit was close to US $200billion. The situation is more serious this year. The US dollar interest rate hike cycle combined with the Russia Ukraine war has pushed up the global inflation level, leading to a sharp rise in India’s import costs.
According to the Statistics Bureau, in June 2022, India’s trade deficit reached US $25.6 billion, up from US $9.6 billion in the same period last year, an increase of 200% year-on-year!
The direct impact of the continuous expansion of the deficit is to intensify the consumption of foreign reserves. Only half of this year, India’s foreign reserves have been reduced by $54.1 billion: the size of India’s foreign exchange reserves in 2021 was $642.453 billion, and by the end of June this year, it had fallen to $588.314 billion.
If it’s just the expansion of the trade deficit, it’s no big deal to relax the restrictions on grain exports and mining of mineral resources. These things can sell for a lot of money at this juncture.
But the problem is that India is also facing two big problems at the same time!
On the one hand, against the backdrop of the Fed’s interest rate hike, international capital is accelerating its withdrawal from India. In the first half of 2022 alone, the net outflow of funds from India reached US $30billion, equivalent to the level of last year, setting the highest annual withdrawal record in history.
What will happen if international capital continues to withdraw?
The first is the decline of the rupee exchange rate, and the US dollar cannot circulate freely in the Indian market. Therefore, international capital needs to sell a large number of rupees in exchange for dollars before withdrawing. At this time, the dollar is a scarce commodity, and the rupee is an abandoned commodity. If there is more selling, the exchange rate imbalance between the dollar and the rupee will be triggered.
Earlier this month, the rupee fell below the 79 rupee mark against the US dollar for the first time in history, making it the worst performing currency among major Asian economies.
Then investors generally lost confidence in India’s economic prospects, and the stock market suffered. The benchmark BSE Sensex has fallen by more than 12 percentage points so far this year, and the Mumbai 30 index has fallen by more than 15 percentage points since October last year.
On the other hand, debt pressure is increasing.
As of last month, India’s total debt was $620.7 billion, with an added value of $47.1 billion. Obviously, India’s current external reserves can’t even repay the principal, and the risk of sovereign debt default is getting higher and higher day by day!
The chart above shows the yield of India’s ten-year Treasury bond. After the last decline to 6.2 on September 21 last year, it began to rise continuously, rising for nearly ten months, and the normalization of 7.5 is just around the corner.
The relationship between yield and holding rate is inversely proportional. The more market holding rate, the lower the yield, which is conducive to reducing the debt repayment pressure. On the contrary, the lower the market holding rate, the higher the yield, because they need to improve the yield to attract more users to buy.
What does it mean that the yield of India’s ten-year Treasury bond has remained high for a long time?
It shows that the market is frantically selling Indian government bonds.
The selling of Indian government bonds further shows that the market is worried about India’s debt default, and if it doesn’t sell, it will fall into its hands.
In other words, the current problem facing India is not as simple as the economic crisis, but the three killing of stocks, bonds and remittances!
Who is the originator of the three murders?
Hey, it turned out that the United States stabbed the third brother with a knife first, so we can’t blame the third brother for stabbing back.
Real brother, I’ll cut you if I say so, and I never loose my belt.
There is really no way to solve the crisis of “three kills” of stocks, bonds and remittances. Anyway, India has more rupees than Sri Lanka. It may have fewer people willing to pay for it. But at least it is better to wait for death after running out of reserves like Sri Lanka?
Of course, there is another trump card of the rupee settlement mechanism: the Indian government announced that it would be denominated in US dollars and then settle all debts in equivalent rupees.
What, you don’t want it?
The third brother’s attitude must be whether you like it or not. After all, it’s not once or twice that it’s rotten.
At that time, investors from all over the world will hold tens of trillion rupees in their hands. You don’t need it to settle, you have to use it to settle, unless you plan to keep it on the book and depreciate madly.
When it comes to dogs, I have to obey my third brother
The second is to solve the problem of Lao Xian’s mind: the rise of local manufacturing industry!
If the rupee settlement mechanism is really promoted, China must suffer the most, because we are the country with the largest deficit among all India’s trading partners: in 2021, the total bilateral trade between China and India was about 125.6 billion US dollars, and the surplus with India was as high as 69 billion US dollars.
Are Chinese export enterprises willing to exchange all this money into rupees? The answer is, of course, No.
Trade is essentially a mutually beneficial economic activity. If you do business with us dollars, euros and RMB, I can buy what I want in the international market after receiving the money. But if you do business with rupee, this currency is not accepted by other countries except your own country, which means that the money I earn can only be consumed in your family to create taxes and jobs for you?
If you want to say, maybe I won’t refute it. The key is that what India can meet China’s needs is nothing more than mineral resources products. New Delhi has set various restrictions and won’t let us buy them.
Most of the top ten commodities exported by India to China are resources
If mutual benefit turns into unilateral exploitation, how about playing a fool?
Moreover, China’s exports to India are mainly medium and high-end goods such as Electromechanical, chemical, metal products and steel products, and the added value is not very high. In addition to India’s already high import tariff cost, Chinese enterprises actually earn very little money in the Indian market, which is purely friendship price and hard money.
Third brother is now engaged in such a business. Chinese enterprises can’t even earn hard money. They are holding a pile of useless waste paper in their hands. If they don’t do well, they have to put money into it. Naturally, they don’t want to do business with him.
After Chinese enterprises withdraw from the market, it will not only benefit Indian local manufacturers, but also save foreign exchange reserves, which can be described as killing two birds with one stone.
This is a new idea. In the past, India always wanted to weaken the price competitiveness of Chinese manufacturers and create a better business environment for Indian manufacturers by raising import tariffs. However, Indian goods are too expensive. Consumers prefer to buy Chinese goods that are good in quality and cheap in price, rather than Indian goods that are cheap and cheap in price. On the contrary, the trade deficit between China and India is growing.
If Chinese enterprises voluntarily choose to quit, Indian consumers will have no choice. They have to buy if they don’t buy!
The last is to prepare in advance for the upcoming regionalization of the monetary system.
The transformation of the world economy from globalization to regional collectivization is a foregone conclusion, and this trend will continue until the United States accepts failure and recognizes China as a new leader. In view of this, powerful and thoughtful countries are actively preparing for this.
American think tanks and policymakers have repeatedly stressed the need to transfer international supply chains to the Americas.
China is committed to promoting and leading the process of economic integration in East Asia,
Russia first allied with Belarus and then attacked Wudong region because the semiconductor industry of the former is developed, while the electronic manufacturing industry and some military industries of the latter are developed. Integrating them into the sphere of influence can fill Russia’s industrial weakness.
The underlying logic of regional collectivization is that all production activities should be completed in the surrounding areas of large countries as far as possible. A regional group is an international industrial division system and economic closed cycle. This also means that the major countries in the core position need to provide a complete set of order and international public goods for the operation of the group, including the indispensable settlement currency in bilateral or multilateral trade.
APEC will soon be replaced by RCEP
Although India’s industrial level is not good enough in the world, it depends on who is younger in South Asia.
In 2021, India’s total exports exceeded US $400billion, and the top ten export commodities were oil and manufactured goods, jewelry, transportation equipment, mechanical equipment, drugs and fine chemicals, metal products, clothing cotton, agricultural chemicals, and cotton yarn. Among them, the transportation equipment, mechanical equipment and metal products with the strongest manufacturing attribute have no problem in all South Asian countries except Pakistan.
With the above advantages and its geographical influence in the region, it is basically no big problem for India to establish a regional economic group. Therefore, India’s implementation of the rupee settlement mechanism at this juncture is more or less meant to prepare for a rainy day.
Whether India can succeed in making the rupee payment order, we must support it. Even if we lose a little money, we must wave flags and shout for the old fairy.
Anyway, it’s not too big to watch the excitement, and it’s not too hairy to watch the dog fight.
What’s more, India stabbed the sixth man in the United States. If it didn’t stab China, it wouldn’t be a big loss. If it did, it would be a great help. Let’s learn from the United States this time and hide behind to pick peaches. Isn’t it fragrant?
Third brother, come on!
Kill Meidi. I’ll support you to be a blue star talker!