(Economic Watch) Looking forward to 2022: Can the RMB exchange rate continue its "independent market"?

  China News Service, Beijing, January 9 (Reporter Xia Bin) In the past 2021, affected by the Fed's start to tighten the scale of quantitative easing and the expectation that it will start raising interest rates this year, the US dollar index has strengthened significantly, while the non-US dollar index represented by emerging markets has strengthened. The currency fell almost across the board, but the renminbi went out of the "independent market".

  Looking at the whole year of 2021, the exchange rate of RMB against the U.S. dollar fluctuated forward, with a slight appreciation in the fluctuations. The spot exchange rate of the onshore RMB and the offshore RMB against the U.S. dollar hit 6.3430 and 6.3258 respectively at the highest mid-year, and the central parity rate of the RMB against the U.S. dollar throughout the year. An increase of about 2.29%.

At the same time, the U.S. dollar index also rose that year, soaring from 89.96 to above 96, closing at 96.66 on December 31.

  Why did the RMB appreciate against the trend?

Yang Aozheng, chief Chinese analyst at FXTM, told a reporter from China News Agency that the main reasons are related to the steady and orderly relaxation of China's central bank's monetary policy, the continued demand for China's export trade driven by the epidemic, and the improvement of domestic companies' ability to deal with overseas debts.

  Wang Youxin, a senior researcher at the Bank of China Research Institute, said in an interview with a reporter from China News Agency that there are four main reasons for the appreciation of the RMB in 2021.

First, against the backdrop of deepening bottlenecks in overseas supply chains and industrial chains, China's export orders continued to increase, and the trade surplus and foreign exchange earnings remained high, which strongly supported the RMB exchange rate.

  Second, the investment and hedging properties of the RMB have become increasingly prominent. As China's financial market has become more open, foreign capital has continued to increase its holdings of RMB stocks and bonds.

The overseas epidemic continues to spread, and new mutant strains appear. There is still a demand for hedging in the market, and the renminbi is more favored.

  Third, overseas inflation continues to be high, while China's inflation remains at a low level. From the perspective of purchasing power parity, it also boosts the RMB to a certain extent.

  Fourth, with the rise of the RMB exchange rate, the demand for foreign exchange settlement by enterprises and residents has increased. In the first 11 months of 2021, the surplus of foreign exchange settlement and sales by banks on behalf of customers reached US$221.65 billion, an increase of 140.6% year-on-year, which improved the foreign exchange supply and demand situation.

  It is worth noting that in 2021, the People's Bank of China and other relevant departments will continue to strengthen communication with the market, strengthen the management of exchange rate expectations, and repeatedly take action to curb the rapid appreciation of the RMB exchange rate, combat the bad speculative sentiment in the market, and make the RMB exchange rate return to two-way fluctuations. The trend will allow enterprises to establish the concept of "risk neutrality", which will help ease the operational pressure of export enterprises, and will also help China's balance of payments continue to show an independent balance pattern.

  Peng Wensheng, chief economist of CICC, bluntly stated that after the RMB moves out of the "independent market" in 2021, its baseline assumption in 2022 is that the impact of the epidemic will gradually weaken. In the context of global monetary policy tightening, the high growth of China's exports is very high. difficult to sustain.

  "Once the growth rate of exports falls, the valuation of the effective exchange rate of the RMB needs to be repaired. We expect that the RMB is expected to undergo a moderate correction in 2022, and the pivot at the end of the year will be around 6.65." Peng Wensheng said.

  Wang Youxin believes that in 2022, the difference between domestic and foreign GDP growth rates and interest rate spreads may fall, and the two-way fluctuation of the RMB will become more obvious. Positive factors from trade surplus and cross-border capital inflows will continue to play a stabilizing role, but the external Federal Reserve will raise interest rates. The acceleration of the process, the rebound in the volatility of the US dollar index, and the increased financial volatility in emerging economies, enterprises and market players will adjust the currency structure of assets and liabilities in light of the changes in the situation. greater than 2021.

  Yang Aozheng judged that in the first quarter of 2022, the global epidemic is rebounding sharply due to the influence of mutated virus strains. It is expected that the supply chain and import and export problems will be difficult to solve in the early this year, and will further push up the global inflation rate, especially in Europe and the United States. , it is expected that the Fed will need to further accelerate the pace of tightening policy and raising interest rates.

  He further said that, on the contrary, China's domestic economic risks are controllable, and inflation factors have not affected the pace of economic recovery. At the same time, the People's Bank of China tends to ease monetary policy in a stable and orderly manner. The incentives for the market to pursue are greatly reduced, and even depreciate.

  Wang Youxin emphasized that rapid appreciation or depreciation is not conducive to high-quality economic development.

At present, China's economic development is still facing three major challenges: demand contraction, supply shock and weakening expectations. In the context of the net inflow of cross-border capital, more attention should be paid to the development needs of the real sector.

Compared with the unilateral appreciation trend, the two-way fluctuation of the exchange rate can stabilize the price advantage of exporting enterprises and promote the recovery of the manufacturing industry.

(Finish)