Zhongxin Finance, May 10 (Reporter Li Jinlei) 6.4, 6.5, 6.6, 6.7... Recently, the devaluation of the RMB exchange rate has attracted attention.

　　The People's Bank of China authorized the China Foreign Exchange Trade System to announce that on May 10, 2022, the central parity rate of RMB in the inter-bank foreign exchange market is: 1 US dollar to RMB 6.7134, a decrease of 235 basis points from the previous trading day and a fall back to the era of 6.7 yuan.

　　Compared with 6.3014 on March 1, the central parity rate of the RMB against the US dollar has been lowered by 4,120 basis points in the past two months.

　　In addition, the exchange rate of offshore RMB and onshore RMB against the US dollar also returned to the era of 6.7 yuan.

How do you view this round of adjustment?

　　The market generally believes that the sharp strengthening of the US dollar index is the main driving factor for this round of RMB exchange rate decline.

　　The US dollar index, which measures the US dollar against six major currencies, has an inverse relationship with non-US dollar currencies such as the RMB.

With the expectation and implementation of the Fed's interest rate hike, the US dollar index has continued to rise since April, once soaring above 103, a new high in 20 years.

　　Tan Yaling, president of the China Foreign Exchange Investment Research Institute, told Zhongxin Finance that since the U.S. dollar and the renminbi's 10-year treasury bond yields have inverted, the renminbi's tendency to depreciate has gradually strengthened.

Although the benefit of the interest rate spread is very weak, this may be the main reason for the partial depreciation of the renminbi, in contrast to the strong expectation of the Fed to raise interest rates and the announcement of the RMB RRR cut policy and the expectation of interest rate cuts.

　　Wang Tao, chief China economist at UBS Securities, believes that if the US dollar index continues to strengthen, as more market players begin to hedge the risk of RMB depreciation, the RMB may continue to face the pressure of phased weakening.

However, the exchange rate of the RMB against the CFETS basket of currencies has not declined significantly. The current exchange rate correction is a normal bilateral fluctuation and will not restrict the implementation of domestic monetary policy.

A view of Ningbo port.

Photo by Shen Yingjun

Devaluation of the renminbi is good for exports

　　Generally speaking, after the devaluation of the RMB, imports will be under pressure, but exports will be good.

　　According to data released by the General Administration of Customs on the 9th, China's imports and exports of goods trade in April increased by only 0.1% year-on-year, a sharp drop in the growth rate of 5.7 percentage points from March.

Among them, exports increased by 1.9% year-on-year, and the growth rate was much lower than the 12.9% in March.

　　Zhang Ming, deputy director of the Institute of Finance of the Chinese Academy of Social Sciences and deputy director of the National Finance and Development Laboratory, believes that at the end of last year, the RMB effective exchange rate index reached a record high.

This shows that while the macroeconomic growth rate is declining, the RMB exchange rate is too strong.

Therefore, it is more beneficial to tolerate the devaluation of the RMB against the US dollar at the moment.

The renminbi rose 10% against the euro and 12% against the yen last year. Such a strong appreciation has greatly affected our exports to the EU and Japan.

Appropriate exchange rate depreciation is good for China's exports.

　　Wang Tao also believes that the RMB exchange rate has accumulated a relatively large appreciation in the past year or so, and it has been overvalued. Now it is moderately adjusted in line with the market, and in a sense, it can also cooperate with domestic monetary policies, which will help support exports and the economy. Speeding up is not necessarily a bad thing.

　　Many listed companies talked about the impact of the devaluation of the renminbi when they responded to investors on the interactive platform.

Tiandi Digital (300743) said that the company's overseas sales revenue accounted for 65.27% of the company's total sales. The company's purchases are mainly domestic, and the devaluation of the RMB is beneficial to the company. The company's products exported to the North American market are settled in US dollars, and the depreciation of the RMB is conducive to increasing The company's foreign exchange earnings.

However, the devaluation of the renminbi will also increase the cost of traveling, shopping and studying abroad.

　　Zhao Yan (pseudonym), who studied in New York, told Zhongxin Finance that his monthly living expenses are about 2,500-3,000 US dollars, and after the US dollar exchange rate rises, he will spend about 1,000 yuan more per month.

If the exchange rate of the US dollar continues to rise when the tuition fee is paid, it may be equivalent to paying a lot of RMB for the tuition fee.

Data map.

Will the RMB exchange rate fall below 7 this year?

　　Regarding the future trend of the RMB exchange rate, Wang Tao predicts that the exchange rate of the RMB against the US dollar will further weaken in the next few months, and may even break the "7" mark in the middle of the year. Looking forward to the second half of the year, as economic growth stabilizes and rebounds, market confidence Gradually recovering, the RMB may return to within 7 by the end of the year.

　　However, people in the industry have different opinions on whether to fall below the 7 mark.

Tan Yaling believes that the probability of breaking through 7 should not be particularly large now, because the probability of the US dollar index pulling back is too high, and the possibility of going up again is not too great. It has a strong restraint at the 104 mark.

　　Cheng Qiang, chief macro analyst at CITIC Securities, pointed out that the United States raised interest rates by 25 basis points and 50 basis points in March and May respectively, and may raise interest rates by another 50 basis points in June and July. certain depreciation pressure.

In the medium and long term, the room for further depreciation of the renminbi is limited, because it is expected that after the epidemic improves, China's exports will support the renminbi exchange rate again, and China's economic fundamentals will gradually improve.

　　Regarding the future view of the RMB exchange rate, Wang Chunying, deputy director of the State Administration of Foreign Exchange and spokesperson, pointed out at a press conference on April 22 that we think there will still be two-way fluctuations, and it will remain basically stable at a reasonable and balanced level.

China's economy is relatively resilient, the long-term positive development trend has not changed, the balance of payments structure is stable, the current account maintains a reasonable size surplus, and RMB assets still have long-term investment value, all of which will provide fundamental support for the basic stability of the RMB exchange rate.

Officials have repeatedly spoken out on the RMB exchange rate

　　On May 10, the four departments issued a notice on the key work of cost reduction in 2022, requiring the RMB exchange rate to remain basically stable at a reasonable and balanced level.

　　On May 9, the central bank released the report on the implementation of China's monetary policy for the first quarter of 2022, adhering to a managed floating exchange rate system based on market supply and demand, adjusted with reference to a basket of currencies, strengthening macro-prudential management of cross-border capital flows, and strengthening expectations management, and guide market players to establish the concept of "risk neutrality", maintain the normal operation of the foreign exchange market, and maintain the basic stability of the RMB exchange rate at a reasonable and balanced level.

　　The executive meeting of the State Council held on May 5 called for maintaining the basic stability of the RMB exchange rate at a reasonable and balanced level.

　　Chen Yulu, deputy governor of the People's Bank of China, pointed out in an interview with the media recently that in response to market demand, we have reduced the foreign exchange deposit reserve ratio of financial institutions by 1 percentage point, increased foreign exchange supply, and strengthened exchange rate expectation management. large fluctuations.

　　Wen Bin, chief researcher of China Minsheng Bank, pointed out that the RMB exchange rate is generally expected to fluctuate in both directions at a reasonable and balanced level.

Therefore, for China's import and export and foreign trade enterprises, they should not bet on the rise and fall of the RMB, but must do a good job in the management of exchange rate risks to ensure the normal production and operation of enterprises.

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