After more than two years, the RMB broke "7" again. What is the future trend?

(Economic Observation) After more than two years, the RMB broke "7" again. What is the future trend?

　　China News Service, Beijing, September 15 (Reporter Xia Bin) After more than two years, the RMB exchange rate fell below the integer point "7" again, setting a new low since July 2020.

At around 18:30 on the 15th, the spot exchange rate of the offshore RMB against the US dollar in the foreign exchange market hit a minimum of 7.0187.

What is the reason for this round of RMB devaluation?

What impact will it bring?

What is the future trend?

　　Zhong Zhengsheng, chief economist of Ping An Securities, believes that there are two triggers for the recent depreciation of the RMB exchange rate: on the one hand, the US dollar index recently hit a 20-year high; further intensified.

　　Zhang Ming, deputy director of the Institute of Finance, Chinese Academy of Social Sciences, pointed out that, in fact, since the beginning of 2022, the exchange rate trend of the RMB against the US dollar has shown the characteristics of "consolidation-sudden depreciation-consolidation-sudden depreciation".

The most important reason for the depreciation of the yuan against the dollar this year is the rapid widening of the long-term interest rate gap between China and the United States.

　　Liu Guoqiang, deputy governor of the People's Bank of China, previously mentioned that the recent adjustment of the RMB exchange rate is mainly due to the adjustment of the U.S. monetary policy.

In the context of the appreciation of the US dollar, other reserve currencies in the SDR (Special Drawing Rights) basket have depreciated significantly against the US dollar, but compared with other non-US dollar currencies, the depreciation of the RMB is relatively small, and the RMB is appreciating against all other non-US dollar currencies. , so the renminbi did not depreciate across the board.

　　Guan Tao, global chief economist at Bank of China Securities, said that whether the exchange rate rises or falls, there are advantages and disadvantages, and they should be treated with normality.

The increased flexibility of the exchange rate will help release pressure in a timely manner and avoid the accumulation of expectations; it will help the exchange rate act as a shock absorber to absorb internal and external shocks and enhance the autonomy of monetary policy; it will help reduce dependence on administrative measures and boost investment confidence.

　　"Although people worry that the depreciation of the exchange rate will affect the performance of the capital market, this is not the case. What foreign investors worry about is not the rise and fall of the exchange rate, but the risk of non-tradables." Guan Tao said.

　　Luo Zhiheng, chief economist of Yuekai Securities, said that the market's concerns about exchange rate depreciation mainly focus on four aspects.

First, depreciation expectations may exacerbate capital outflows, impact domestic asset prices, and trigger financial risks.

Second, the depreciation of the exchange rate leads to an increase in the cost of raw material imports, which intensifies imported inflationary pressures and squeezes the profits of downstream industries.

The third is to increase the pressure on the repayment of principal and interest of foreign debts.

Fourth, the domestic monetary policy is restricted, and the policy space for stabilizing growth is limited.

　　"But the above risks are generally controllable." Luo Zhiheng said, first of all, the main reason for the current depreciation of the RMB exchange rate is the rapid strengthening of the US dollar index.

The RMB is still a strong currency, and there is no strong depreciation expectation.

Secondly, China's external dependence on food and energy is smaller than that of Europe, and it has always emphasized supply and stable prices. The fall in global commodity prices has also weakened imported inflation pressures to a certain extent. In addition, China's overall external debt is not large. , and the macro policy adheres to "I am the main".

　　He also pointed out that the depreciation of the exchange rate also has a positive side.

In the context of the rising risk of global economic recession, the market is worried that the export growth rate will drop rapidly, and the depreciation of the exchange rate will enhance the competitiveness of China's export products and boost exports to a certain extent. In the industry, the depreciation of the exchange rate can increase the exchange rate and improve the operating efficiency of the enterprise.

　　After breaking "7", where will the RMB go?

The co-chief economist of CITIC Securities clearly pointed out that in the context of a strong dollar, it is not so important whether the RMB exchange rate breaks the key point of "7", and the fluctuation of the exchange rate under the complex and volatile international situation should be viewed rationally.

　　He pointed out that the PBOC has a wealth of policy tools to stabilize the exchange rate, including but not limited to activating counter-cyclical factors and adjusting macro-prudential adjustment parameters for cross-border financing of enterprises.

Among them, the counter-cyclical factor will directly affect the quotation model of the central parity rate of RMB against the US dollar. From the historical experience, this tool is very effective in dealing with the continuous unilateral depreciation of the RMB.

　　Luo Zhiheng said that the exchange rate breaking "7" is only a return to the equilibrium exchange rate, and there is no need to worry too much.

The future trend of the RMB exchange rate depends on three factors.

The first is the strength of the US dollar index, the second is the recovery of the domestic economy, and the third is the policy intervention to maintain exchange rate stability.

However, the RMB exchange rate does not have the basis for long-term depreciation. With the future US dollar index rising and falling, domestic economic stabilization and recovery, and appropriate intervention of policy tools, the RMB exchange rate will return to below "7", just like the previous two rounds of breaking "7" Same.

　　Guan Tao predicts that the rest of the year will still be "interweaving between long and short positions", and the RMB will continue to maintain a wide range of two-way fluctuations.

In the short term, it may be that bearish factors prevail, but it is not ruled out that some potential benefits will gradually emerge by the end of the year.

(Finish)