One of the things that has become apparent over the past few years is that the United States has repeatedly targeted China's financial markets, feeling like it wants to play some kind of conspiracy after losing the trade war.
Let's give you a set of data, and then look at the logic behind it, in the second quarter of 2018 and 2019, one is that the United States threatens to impose tariffs on the mainland, and the other is to impose tariffs of 10%-25% on the ground.
Both times the tariffs were imposed on the renminbi, there was a more pronounced depreciation (FOB price), from 6.4-7 and 6.7-6.9, with a brief appreciation of the renminbi in the middle of a G20 summit.
At that time, there were two different voices in the market, one was that the mainland took the initiative to depreciate its exchange rate in order to hedge the impact of the trade war, and the other was a tariff panic, triggering capital outflows.
Finally, the answer was found according to the published financial account access:
At the end of March 2018, after the United States began a trade dispute, the balance of the mainland's financial accounts after excluding reserve assets fell rapidly.
In May 2019, when U.S.-China trade talks were blocked and tariffs were raised by $200 billion, the balance between financial accounts (excluding reserve assets) fell sharply in the second quarter of 2019 and turned into a deep negative.
It can be seen that capital outflows with panic should be the main driver of the depreciation of the renminbi, which can also lead to a conclusion: if the trade war is Uncle Sam's conspiracy, then triggering capital outflows is a complete conspiracy.
So why does the United States do this, because in the last round of interest rate hikes by the Federal Reserve in 2015-2018, it did not gain any benefits on the mainland, and the 3-year interest rate was added and Uncle Sam was lost.
From 2015 to 2016, due to the stock market crash, foreign investors' holdings of RMB financial assets fell from 4.6 trillion yuan to 3 trillion yuan, and then returned to 4.5 trillion yuan in early 2018.
This cycle is exactly the range of the Fed's interest rate hikes, which means that the value of China's financial market continues to be optimistic, and the Fed's interest rate hikes have not allowed capital to leave the Chinese market, which is the cause of the core conspiracy of the United States to launch a trade war.
So far, the renminbi has depreciated by more than 2,700 points (6.338-6.6105) since the beginning of the year, and most of the depreciations have occurred from 4.19, with a total depreciation of more than 2,000 points in the last five trading days.
Some people think that the yields of Chinese and American Government bonds are inverted, some believe that the impact of the current epidemic on our economy this year has caused investors to worry, and some people think that the Fed will raise interest rates this year or is unprecedented. Explain one by one:
▲ The "upside down spread" thing is at most a fuse, and it will not last long, the reason is very simple that capital inflows into the United States are unprofitable, and inflation in the United States is ridiculously high, and it is meaningless to go.
▲ The epidemic is definitely some impact on the economy, but in fact, it is not large, a series of policies have landed, once the outbreak in the later part of this year is inevitably very high, and the mainland's foreign trade growth in the first quarter is still fierce and rapid.
No matter how the Fed raises interest rates this year, the impact on the mainland financial market has always been limited, and the world's favor for RMB assets is far from being comparable in the past few years.
In other words, internal we are resilient enough, the external (DOLLAR) no matter how sharp, will not be the biggest reason for the rmb to depreciate so much, we look at foreign holdings of RMB financial assets, as of the end of February was 10.5 trillion yuan, down 300 billion yuan, but increased by 900 billion yuan year-on-year, according to the same period in previous years, this figure is relatively in a slight decline.
Foreign capital holds domestic RMB financial assets
In this way, this round of RMB depreciation we have its own purpose - before too strong, since last June the dollar crazy even, nearly a year of the RMB is also, relatively speaking, this is a good thing, indicating that foreign capital believes that the RMB also has a hedging effect.
However, too strong is not enough, for example, the strength of the US dollar has led to a global non-US currency wailing, and the capital of some countries may flow into the United States, but there are also those who do not want to go, after all, this year's US financial sanctions have played the bottom line, and this venture capital is certainly unwilling to bear.
At this time, they fell in love with the Chinese market, but the renminbi is too strong, so that the exchange rate loss that exists in entering the mainland market will discourage some foreign investors.
Of course, depreciation is also beneficial to the mainland's exports, and it is also necessary to increase income through exports when the economy encounters some problems. There is a message in these two days to explain. Affected by the epidemic, some of our foreign trade orders were robbed by Southeast Asia, for example, Vietnam's exports exceeded Shenzhen in March, surging by nearly 50% month-on-month.
Of course, this depreciation is indeed a bit urgent, which is the result of some foreign investment being bad, or it is not malicious, which belongs to the short-term gold market in the mainland market. According to IIF data, foreign capital slipped 111 billion yuan last month, including 71 billion yuan in bonds and 40 billion yuan in stocks, during which the rmb exchange rate depreciated from 6.3 to 6.4.
Now the central bank has also made means to lower the foreign exchange deposit rate (the proportion of funds that foreign investment in China needs to hand over to the People's Bank of China), from 7% to 9% at the end of last year, and now it is down to 8%, to put it bluntly, it is to retain foreign capital as much as possible, this operation is very important.
Recently, not only the renminbi plummeted, but the stock market also experienced a sharp correction, if calculated from the beginning of the year, it fell by more than 750 points, and the market value fell from 75 trillion yuan to 59 trillion yuan, evaporating 16 trillion yuan.
Theoretically, the appreciation of the renminbi will lead to more and more foreign investment being attracted into China, and eventually form the result of foreign capital pouring into China to find investment opportunities, foreign capital will put the converted renminbi into the Chinese stock market, and then the stock index will rise.
On the other hand, in the face of the influx of foreign capital, foreign exchange will rise, to maintain the stability of foreign exchange, to appropriately increase the money supply, interest rates will also fall, to promote the rise of stock indexes.
However, historical data show that even if the renminbi is in a depreciation trend, the probability of foreign capital flowing into the stock market is also very large, so exchange rate changes may bring more structural opportunities to the stock market, such as the appreciation of the renminbi for the increase in the profits of enterprises whose imports are greater than exports.
Then there is only one possibility, external factors lead to fluctuations in the exchange rate and the stock market at the same time, such as the above-mentioned foreign capital outflow triggering a sell-off or the impact of the epidemic.
Then again, the impact of foreign capital on the domestic stock market is very small, and the inflow into the US stock market is useless, the return on inflation is extremely low, short-term speculation may do so, the long-term or depends on the economy, and China is still the best choice.
Therefore, it is simply a fantasy for the US dollar to harvest the mainland stock market in the case of interest rate hikes, so what is the significance of this deep adjustment of the stock index? Deleveraging! Where the leverage, real estate.
In recent years, there are some real estate companies frequently exploded, including many industry giants, this bubble must be squeezed out as soon as possible, some time ago mainly engaged in the bond market to start, to reduce the financial leverage of these real estate companies, to ensure that they can carry out business normally, such as delivery on schedule.
At present, many enterprises have temporarily turned the crisis into safety, if it is said that "getting rid of the bitter sea" still needs time, the problem of real estate enterprises in addition to bonds, is the stock market.
According to new data added last year, real estate financing credit bonds accounted for more than 31%, overseas accounted for 15%, trusts and credit bonds, followed by ABS financing accounted for 23%.
It should be noted that ABS financing is plainly based on the project in hand, and then the expected return of the project is guaranteed, and then issues bonds to raise funds.
The above all belong to the issuance of debt financing, is the most difficult to deleverage the bones, in addition to this is the real estate listed company stock increase financing, in fact, this belongs to the invisible increase in leverage, once faced with poor management, these money also have to drift, not only no matter who invests, it hurts the capital.
There are generally two kinds of fixed increase financing for real estate enterprises: the first is direct financing, giving investors shares, and then taking money; the second is through the bank, that is, the bank first fixed increase financing, and after raising money, the real estate enterprise will borrow it through ABS financing.
For example, at the peak of the real estate debt ratio in 2018, one of the industries with the most fixed increase financing in that year was the financial industry, for example, the Agricultural Bank of China raised 100 billion yuan in that year, refreshing the historical record.
Since 2015, the price-to-earnings ratio of real estate has been declining, and the stock index is getting lower and lower, which belongs to the industry's low, the valuation is only incidental, and now it is to transfer the capital belonging to real estate to enterprises that are more conducive to economic development, such as communications, medical and other technology companies.
However, the relative valuation of these companies is on the high side, which is not conducive to a large amount of capital inflows, so this stock index squat squeezes out the invisible capital of real estate companies on the one hand, and increases enterprises with better gold content on the other hand.
Therefore, this round of depreciation of the renminbi or the decline of stocks is needed by the financial market and is fully in line with the purpose of our financial services entities.
However, in this process, there must be pain, but the time will not be very long, and it is not advisable to follow the trend, especially the trend of foreign capital, to know that these capitals come back to the bottom faster than anyone.
The last admonition: Wealth is beautiful, and the process of obtaining wealth may be "tragic", and do it and cherish it.