The advantages of RMB exchange rate appreciation outweigh the disadvantages
Fan Dayu
Today's Review
The recent renminbi exchange rate reversed its previous overall weak trend in one fell swoop, supported by the continued improvement of China's economic fundamentals, and it is also directly related to external factors such as global monetary easing and the depreciation of the US dollar.
The recent appreciation of the renminbi has played a role in accelerating the internationalization of the renminbi.
In addition, the appreciation of the renminbi has made the attractiveness of renminbi assets more enhanced, and the entry of more foreign capital will form a stable support for A shares.
The current rising trend of the RMB exchange rate is not accidental. It is the result of a variety of economic and financial factors.
Recently, the RMB exchange rate has continued to strengthen, and the RMB exchange rate against the US dollar has reached a new high.
Since the May low, the RMB exchange rate has rebounded by more than 3,600 basis points in just over three months.
In August, the RMB exchange rate rose by 1.84%.
Since September, the exchange rate of RMB against the U.S. dollar has broken multiple barriers in a row. The central parity of RMB in the inter-bank foreign exchange market has risen above the 6.8 barrier.
At the beginning of this year, under the impact of internal and external factors such as the new crown pneumonia epidemic, the RMB exchange rate fell for a while.
By the end of May, the exchange rate of the RMB against the US dollar once hit a 12-year low.
After that, as the fight against the new crown pneumonia epidemic has achieved major strategic results, the resumption of work, production and business resumed in an orderly manner, and the normal economic and social order gradually recovered. The GDP growth rate in the second quarter turned from negative to positive, and the growth rate exceeded market expectations.
China's economy has taken the lead in getting out of the impact of the epidemic, and the RMB exchange rate has also been rising all the way, and the speed and intensity of appreciation have exceeded market expectations.
The recent renminbi exchange rate reversed its previous overall weak trend in one fell swoop, supported by the continued improvement of China's economic fundamentals, and it is also directly related to external factors such as global monetary easing and the depreciation of the US dollar.
Due to the spread of the epidemic, the European and American economies have been hit hard. In response to the epidemic, relevant countries have launched loose monetary policies, especially the Fed's unrestricted balance sheet expansion, which intensified the depreciation of the dollar.
The US government’s ineffective prevention and control of the epidemic and the excessive abuse of the Federal Reserve’s monetary policy have cast a shadow over the future of the US dollar system.
In contrast, international investors are more optimistic about China's economic prospects and renminbi assets, and the global financial market’s confidence in the renminbi continues to increase, and therefore the renminbi exchange rate has gained sufficient momentum to appreciate.
The recent appreciation of the renminbi exchange rate can be described as "momentous."
In the past three months, the renminbi exchange rate has continuously broken through the three important barriers of 7.0, 6.9, and 6.8, which is the fastest rise in 10 years.
The benefits of RMB appreciation are obvious.
A stronger RMB exchange rate against the US dollar is good for importing companies, which can reduce corporate procurement costs and increase profitability.
The appreciation of the renminbi is conducive to overseas shopping, reduces overseas consumption costs, and increases consumer welfare.
The current round of RMB exchange rate appreciation has also significantly increased the attention of RMB in the international market.
The willingness of foreign central banks to increase renminbi reserves has increased, the number of Chinese government bonds purchased by foreign capital has increased significantly, and more international financial institutions have joined China's cross-border payment system.
The recent appreciation of the renminbi has played a role in accelerating the internationalization of the renminbi.
In addition, the appreciation of the renminbi has made the attractiveness of renminbi assets greater, and the entry of more foreign capital will form a stable support for A shares.
At present, China is continuing to promote the opening of the financial market. Looking ahead, there are still many unstable and uncertain factors in the external environment. The appreciation of the renminbi will help stabilize market sentiment and boost market confidence.
The current round of RMB exchange rate appreciation has increased the willingness of enterprises and residents to settle foreign exchange, and has effectively stabilized the scale of foreign reserves.
The current round of appreciation also shows that the RMB exchange rate has become more flexible and will continue to play its role as an "automatic stabilizer" in regulating the macro economy and international payments.
However, the rapid appreciation of the renminbi has also caused difficulties for the development of my country's export enterprises.
Affected by the impact of the epidemic, external demand has slowed, and the appreciation of the renminbi has increased the cost of export products, and the competitiveness of export enterprises' products in the international market has been greatly weakened.
At the same time, the appreciation of the renminbi market brings exchange rate risks, which may lead to exchange losses. Export companies must take measures to prevent them.
In addition, because of the optimistic outlook of the renminbi exchange rate and the increasing demand for renminbi assets, the influx of funds from the north has exceeded 100 billion this year.
The influx of a large amount of hot money for short-term speculative gains may bring asset bubble risks.
The current rising trend of the RMB exchange rate is not accidental. It is the result of a variety of economic and financial factors.
The current round of RMB exchange rate appreciation has both advantages and disadvantages for China's economic development, but overall the advantages outweigh the disadvantages.
We must make good use of the benefits brought about by the appreciation of the renminbi, and we must always be vigilant about possible risks, and we must take precautions and take precautions.