China News Service, Beijing, December 25th, title: In 2021, will the RMB exchange rate "keep rising"?

  China News Agency reporter Xia Bin

  After the market has gradually adapted to the fluctuation of the RMB exchange rate around the integer 7, it will start a round of gains at the end of May 2020 and continue until the end of the year.

Can the "rising" exchange rate situation be maintained in 2021?

  2020: Exchange rate volatility increases significantly

  From the lowest point to the highest point during the year, this year's RMB exchange rate has drawn a trend chart with volatility exceeding 7000 basis points.

  As of December 25, the central parity of the RMB exchange rate against the US dollar was reported at 6.5333, which remained in the 6.5 range throughout December.

The spot exchange rate of the onshore and offshore RMB against the US dollar hit the highest value of the year in December, and the latter broke through 6.5, touching 6.5208 and 6.4927 respectively.

  "In 2020, the renminbi exchange rate will depreciate before and after it rises, and the volatility will increase significantly." Wang Youxin, a researcher at the Bank of China Research Institute, told a reporter from China News Agency that the depreciation stage will be from the beginning of this year to May 28, during which the RMB spot exchange rate will depreciate approximately. 2.8%, followed by the rapid recovery of China’s economy, which entered the appreciation stage. Until December 25, 2020, the renminbi will appreciate as high as about 9.4% during this period. The rapid appreciation is rare.

  He further stated that, from the perspective of stages, the exchange rate for the whole year is divided into seven stages, four appreciation stages and three depreciation stages, which alternately occur, and exchange rate volatility has increased significantly.

In terms of volatility, the volatility between the highest and the lowest exchange rate during the year was 9.6%, an increase of 2.1 percentage points from last year. It was the second highest since the exchange rate reform in 2015 and second only to 2018 when the Sino-US trade friction occurred.

  2021: The supporting factors are still strong

  The outstanding performance of China's economic fundamentals in the world's major economies is the foundation for the strengthening of the RMB exchange rate, and multiple factors at home and abroad have also contributed to the appreciation.

  Liu Ligang, managing director of Citibank’s research department and chief China economist, said in an interview with a reporter from China News Agency that the appreciation of the renminbi in 2020 is mainly driven by market forces. China’s capital market has further opened up, foreign capital has increased its allocation of renminbi assets, and China’s foreign interests Factors such as the gradual widening gap and the weakness of the US dollar index have supported the rapid appreciation of the renminbi this year, and these situations and phenomena will continue next year.

The RMB exchange rate is expected to rise to around 6.3 in June next year, and it may rise to around 6 by the end of the year.

  In Wang Youxin’s view, from the current situation, the three factors that support the strengthening of the RMB exchange rate will not change in the short term, the performance of domestic and foreign economic recovery, the trend of monetary policy and the trend of the US dollar index. China’s economy will continue to accelerate its recovery and the monetary policy will gradually change. The normalization of the US dollar index will continue to maintain a weak trend under the drag of the sluggish economic recovery and loose monetary policy in the United States.

Therefore, the renminbi is likely to remain strong in 2021.

  "However, considering that the continued strength of the RMB will bring some restraints to the export sector and the real economy, and will have a certain impact on trade balances, the central bank has recently reduced the foreign exchange risk reserve ratio for forward foreign exchange sales and the cross-border banking sector. Financing parameters have released a signal to stabilize the exchange rate." Wang Youxin said that the possibility of a substantial unilateral appreciation of the RMB next year is not high, and the rate of appreciation is expected to be lower than in 2020.

  Three points need to be paid attention to when "the rising sound continues"

  The appreciation of the renminbi in 2021 is currently considered a high probability event, but there are still three issues that need to be paid attention to in the process of rising.

  One is to be wary of bubbles caused by foreign capital inflows.

Liu Ligang said that next year, there may be more foreign capital flowing into domestic high-yield industries in pursuit of profit, which will easily cause a new round of asset bubbles and must be treated with caution.

  Second, companies should adhere to the principle of neutral exchange rate risk.

Wang Chunying, deputy director of the State Administration of Foreign Exchange of China, stated that on the one hand, companies must adapt to the market environment of two-way fluctuations in the RMB exchange rate, overcome the "floating exchange rate fear", and rationally face the rise and fall of exchange rates; Derivatives manage exchange rate risk, maintain a stable and sustainable financial situation, do not spend too much energy on judging or speculating on exchange rate trends, avoid deviating from the main business or mutating derivative transactions into speculative arbitrage, and bear unnecessary risks.

  Third, the direction of exchange rate market reform remains unchanged.

The recent Central Economic Work Conference mentioned that next year, we will deepen the reform of interest rate and exchange rate marketization and keep the RMB exchange rate basically stable at a reasonable and balanced level.

In this regard, international financial expert Zhao Qingming said that in the future, in the foreign exchange market, the frequency and intensity of the use of administrative or technical interventions may decrease, and the power of the market itself will be more fully utilized, thus continuously expanding the depth of exchange rate market reform .

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