#5月财经新势力 #
This is the 1738th original article by Panda Babe
This article is very informative, the content involves professional terms in the field of finance and economics, it is recommended to read patiently.
In May 2023, China's RMB, the trend in the global monetary environment, is worth paying attention to:
On May 17 and May 18, the offshore RMB and onshore RMB continued their decline for several months, and successively broke through the integer mark of 7.0 in the morning and afternoon sessions of the Asian market on May 17.
As of 16:30 on May 18, the exchange rates of offshore RMB and onshore RMB against the US dollar fell by 0.51% and 0.46% to 7.0467 and 7.0275, both new intraday lows since the end of December last year.
At 19:00 on May 17, the onshore market RMB against the US dollar (CNY) hovered around 6.9939, falling to a yearly low of 7.0049, while the offshore market RMB against the US dollar (CNH) touched 7.0094, once falling to the year's low of 7.0225.
Screenshot of the RMB exchange rate as of 22:00 Beijing time on the 17th
After nearly half a year, the RMB exchange rate broke the 7-character mark in the session. For a while, a large number of screens began to be brushed again, and various anxious-creating views came out again.
Although similar manufacturing anxiety has been common in the past few years.
But the months since 2023 have been particularly frequent.
As soon as inflation rises slightly, it is said that it is necessary to increase inflation. As soon as inflation falls slightly, it is said that there will be a big deflation.
Now the RMB exchange rate fluctuates a little more, touching a sensitive node, all kinds of wild roads, for the sake of traffic, ignorance and ignorance, and even the speculation and views of private goods, wrapped in selfish intentions.
Of course, this is an inevitable process of China's economic and financial maturity, but some essences still need to be clarified.
This article will analyze the core reasons for the latest trends in the RMB exchange rate based on the review and combing of the latest trend of the RMB exchange rate in May 2023, interpret the signals released by the trend, and conduct a rational correlation and trend judgment on the subsequent Chinese trend of the RMB exchange rate and the economy.
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Image source: Toutiao Gallery
1
In May 2023, offshore and onshore RMB broke 7, what is going on?
On May 17, the offshore renminbi fell below the 7 mark against the US dollar again after nearly eight months. As of 13:30 Beijing time on the same day, USD/CNY was trading at 7.0144 and USD/CNY was trading at 6.9978. At around 16 o'clock, the onshore yuan also fell below the 7 mark at 7.0017, and the USD/CNY remained around 7.0168.
Image source: Web
On the morning of May 17, the offshore renminbi fell below the "7" mark against the US dollar, the first time in the year.
After the opening of the onshore market, the RMB exchange rate against the US dollar also fell all the way and approached the "7" mark. On the day, the central price of the yuan against the dollar fell by 242 points to 6.9748.
Image source: Web
Starting from the basis of economic theory: the exchange rate is an important leverage indicator to balance the domestic and international sides of a country and an economy.
Take the depreciation of RMB as an example:
A weaker renminbi would make China's exports more price-competitive, thereby raising the level of exports.
However, it also leads to higher prices of imported goods, which exacerbates inflationary pressures. In addition, the depreciation of the renminbi may also lead to the outflow of foreign capital, which will have a certain impact on China's capital market and currency market.
From a microeconomic point of view, from the performance of the renminbi this time, if denominated in US dollars, the purchasing power of the renminbi has depreciated by nearly 4%, and affected by this, renminbi assets have also been affected to a certain extent.
For example, at present, the stock market, housing market, car market and other asset prices that are closely related to the external circulation have seen different degrees of correction.
Therefore, can it be said that the depreciation and appreciation of the renminbi is a major event that affects the purchasing power of all Chinese households?
No, in fact, this is the key to many Internet financial analysis stealing concepts:
China is a currency control country, and the fluctuation of the RMB exchange rate may have an impact on China's domestic macro and industry, as well as the flow of speculative capital, but it has no direct impact on the domestic microeconomy, especially household consumption and purchasing power.
Let's think about whether the US dollar or other currencies can circulate and consume in China, let alone buy a house and a car, take a hundred yuan denomination of US dollars, go to eat a barbecue and try?
How is 1:7? What about 1:20? Discussing the impact of exchange rates on purchasing power in the context of currency control is a typical use of economic theory for blackmail and deception.
Understanding this essence is crucial.
In fact, since March, the RMB has entered the current round of moderate depreciation of the small cycle, and the depreciation is slightly greater than the appreciation of the US dollar, which means that the trend of the RMB price is close to the trend of the US dollar price.
Previously, the price movement of the renminbi tended to be stronger than that of the dollar.
This shows that a new situation has emerged in the current round of RMB depreciation.
But in fact, this is still a normal fluctuation in the financial market, and there is no need to read it too much.
The trend of the RMB exchange rate is mainly affected by market supply and demand, and is also related to the domestic and foreign economic and financial situation and the trend of the international market.
Since 2023, the mainland's economic operation has stabilized and improved, the balance of international payments has been independently balanced, the scale of foreign exchange reserves has continued to rank first in the world, and the good basic face has formed a strong support for the RMB exchange rate.
Generally speaking, the RMB exchange rate will still fluctuate in both directions this year, and will generally remain basically stable at a reasonable and balanced level.
Financial markets, normal fluctuations, and little impact on China's domestic economy and consumption environment, even if foreign exchange controls are not considered, then is the firewall of China's foreign exchange reserves fake?
At present, on the Chinese Internet, the stronger this kind of anxiety and singing about the collapse of China's economy, the more it shows that the United States is in a hurry.
Because ordinary Chinese are only worried at most in the face of the current economic situation and these macro trends.
Those who will brush the screen everywhere and deliberately create an anxious atmosphere are most likely just the product of American funds, of course, it may also be Western economic believers, who will only be brainless and do not use ideas to fool.
It's not complicated, it's just that.
Image source: Toutiao Gallery
2
Cause and Impact Analysis: What Causes RMB Depreciation? What are the implications?
The exchange rate trend is definitely the result of the combination of many factors.
The exchange rate broke 7, mainly due to external and internal factors, as well as global economic risk factors, three factors.
Here's a detailed analysis and discussion for you:
First of all, the global economy and financial markets are "repricing" the Fed's interest rate hike schedule:
Since the first interest rate hike in March 2022, the US dollar has continued to raise interest rates ten times, quickly pushing the US federal funds rate (similar to the interest rate on demand deposits) to 5.0%~5.25%.
Affected by this, the US 10-year Treasury bond yield has also changed from nearly 2.5 points lower than China's 10-year Treasury bond yield to nearly 1.0 points higher than China's 10-year Treasury bond yield.
Image source: Wind
This "breaking seven" still has the shadow of the Federal Reserve, and the Fed's attitude is still hawkish, resulting in the overall strength of the dollar index. On May 3, the Fed raised interest rates by another 25 basis points. Wind data shows that since May, the dollar index has risen more than 1.2%, and once rose to 103.0396 on May 17, the highest since April 4.
However, most economists believe that as the US inflation rate continues to fall, the Fed's current round of interest rate hikes has reached its end. According to CME Group's rate hike forecasting tool, the Fed rate is widely expected to fall to around 4.5% by the end of this year.
Under the consensus, the strengthening of the US dollar has led to the weakening of the RMB, which is a very obvious and understandable external factor.
Secondly, there are internal factors:
Although the European and American economies are in high inflation, there is even a risk of a hard landing until next year.
However, because China's economy is in a different cycle from the European and American economies, the overall resilience is strong and the potential is greater, and the fundamentals of long-term recovery have not changed.
However, China's economy will also encounter some small episodes and twists on the road to recovery, and a series of economic and financial data released by the National Bureau of Statistics and the Central Bank in May 2023 also reflect that this round of recovery of China's economy has actually seen some adverse performance.
In particular, China's CPI and PPI data for April were lower, and the CPI fell to a low of 0.1%, driving expectations of interest rate cuts.
When the economy is under pressure, there will be expectations of monetary stimulus, and such expectations, further consideration is the possibility of currency release, one trade-off, the trend of exchange rate depreciation is not a trading performance of this expectation?
Finally, there is the interference of global economic risk factors.
There are two main risk factors mentioned here, one is the default of US debt caused by the risk of US debt ceiling, resulting in global capital "cash is king" against the US dollar, and demand squeezes the appreciation of the US dollar.
Another is that risks in the US banking sector are still brewing, which has also led to the continuous increase in the preference of various capital holdings in the US since March.
Internal and external demand formed a resonance, everyone threw US debt, took dollar cash, the dollar definitely strengthened.
Of course, there is another factor that cannot be ignored, that is, since the beginning of 2023, the trade surplus created by China's foreign trade has remained at the high level of the past 10 years.
A high-growth surplus requires exchange rate coordination, and from this point of view, the Chinese state also has good reasons to loosen the shackles on the depreciation of the renminbi against the dollar to a certain extent.
A moderate depreciation of the renminbi is conducive to expanding exports and stabilizing employment. Of course, for imported products, it may be slightly more expensive.
The moderate weakening of the RMB exchange rate is conducive to further economic recovery, which is therefore a positive signal.
For a long time, ordinary Chinese people have formed a misconception that the stronger the renminbi, the better.
In fact, when the renminbi was at its strongest, it was the era of planned economy.
For example, from 1955 to 1970, 1 US dollar was equivalent to 2.4618 yuan; from 1971 to 1979, the renminbi continued to appreciate, from 2.267 yuan to 1 US dollar to 1.496 yuan to 1 US dollar. But at that time, China's export volume was extremely small (the renminbi was too expensive, exports were not competitive), and there was an extreme lack of foreign exchange at home, and it was difficult for ordinary people to exchange foreign exchange at that time, and it was difficult to export for private purposes, let alone go abroad.
After the reform and opening up, the RMB depreciated moderately and accepted the transfer of manufacturing, and gradually embarked on the road of national prosperity and people's strength.
The exchange rate is just a number, which is suitable for one's own reality and conducive to economic development, which is the most important.
Image source: Toutiao Gallery
3
Trend research and judgment: Next, how should we see the RMB exchange rate and the trend of China's domestic economy?
How the RMB exchange rate fluctuates to benefit China's economy has been debated endlessly, but the official caliber has always been that the RMB exchange rate should "fluctuate in both directions", and the sharp appreciation or depreciation does not have a substantial basis, only two-way fluctuations can blur expectations, avoid the choice of consistency of funds, and large appreciation or depreciation is not good for the Chinese economy.
The exchange rate mainly has an impact on the economy through the channels of import and export, appreciation is beneficial to imports, and depreciation is beneficial to exports, and the logic is actually very simple.
The appreciation of the renminbi means that domestic funds can buy more foreign goods, and the renminbi is worth more than foreign currency, naturally imported goods are cheaper.
The depreciation of the renminbi means that foreign currencies can buy more Chinese goods, which is beneficial to stimulate exports and earn foreign exchange.
There is no absolute right or wrong in the rise and fall of the exchange rate, only how the economic reality needs and whether it can meet the characteristics of the economic stage.
Exchange rate policy and exchange rate fluctuations in China often depend on the domestic economic situation:
If the domestic economy is relatively weak, it is necessary to stimulate exports through the depreciation of the renminbi, improve foreign trade, and increase the growth rate of import and export, the carriage that drives the economy.
If the domestic economic recovery is strong, or even shows signs of overheating, it is necessary to stimulate imports through the appreciation of the renminbi, so as to prevent foreign trade, the carriage that drives the economy, from running too fast and cooling the economy.
If the relationship between the exchange rate and the domestic economy is clarified, then there is actually a more rational and scientific research direction for the next exchange rate trend.
One thing worth noting:
The United States has never listed anyone as a currency manipulator because of a strong exchange rate;
On the contrary, because the currencies of some countries (regions) have depreciated, they are considered by the United States to be exchange rate manipulation and use sticks to intervene.
The most classic case is that when the Japanese economy was about to catch up with the United States, it was forced by the United States to continue to appreciate the yen, which eventually collapsed the Japanese economy. What does this say?
China makes money by manufacturing and exporting physical goods;
The United States exports the dollar, manipulating interest rates to make money.
Next, China's economy seeks recovery and sustainable development, the RMB is stable and downward, only logically, as for how much depreciation is appropriate, when it is necessary to intervene to control the rhythm, what degree is reasonable, other countries are difficult to say, but the Chinese state, must be able to say one thing on several key points.
For the RMB against the US dollar exchange rate falling below 7, some views and so-called analysis fuss, in fact, is completely meaningless, and even the depreciation of the RMB as a reason to shorten China's economy, can only create anxiety and attract traffic.
What should really be done at present is to reasonably guide the expectations of the market, do not make too many subjective interpretations, and create a stable and positive public opinion environment for China's economic development is the top priority:
On the one hand, exchange rate fluctuations do not affect the domestic economic environment of earning RMB and spending RMB, affecting who is anxious and who is worried, right?
On the other hand, the next recovery of China's economy, the continuation of foreign trade carriage, providing the meaning of growth, is very important.
Realistic and evidence-based. Again: there is no absolute good or bad when the exchange rate rises and falls, and in China, it is necessary to firmly believe in the national will and the choice of top-level design.
In 2022, try to "short the Chinese economy" action, and then arbitrage speculative capital in the exchange rate market, this time, dare to sell short to make a fortune?
In the past, when the RMB exchange rate fell below the "7" integer mark, some overseas speculative capital would always take the opportunity to bet that the RMB would continue to fall, but this time the foreign exchange market could hardly see them.
Financial games are so realistic and interesting.
Image source: Toutiao Gallery
Written at the end:
Combined with the possible trend of the RMB exchange rate economy, how should ordinary individuals see the main line clearly and guide their actions?
At the end of the article, do not talk about macro words, complex logic, back to China's domestic economic environment, standing from the perspective of ordinary individuals, based on the analysis and discussion of the trend of the RMB exchange rate and subsequent trends, how to see the main line, guide actions, and share with you a few exclusive views, not necessarily right, the right to throw bricks and jade, for readers and friends to discuss and reference:
1. From a realistic point of view, at present, the People's Bank of China has come to the threshold of guaranteeing interest rates or exchange rates.
Although the renminbi is currently weakening, it should be less likely to intervene in the foreign exchange market in the short term.
The reason for this is that the current weakness of the RMB is closely related to the trend of China's economic fundamentals, and only a good economy can drive the RMB to strengthen again.
From a monetary policy perspective, this may mean cutting interest rates first, or accelerating the efficiency of monetary easing to pull the economy back into business.
If interest rates are not guaranteed, regardless of exchange rates, then it is good for China's domestic asset and financial markets. Of course, this is also a clear direction that the current Chinese state wants to achieve.
2. A proper depreciation of the renminbi is not a bad thing. The interest rate is the price of RMB internally, and the exchange rate is the price of RMB abroad. Falling interest rates can promote investment and consumption, and falling exchange rates can promote exports. Global consumption is relatively sluggish, this year's foreign trade pressure is relatively large, this year's export data is better than expected, but mainly clothing, steel, ceramics and other traditional products, high-tech production and exports fell 13.4% in US dollar terms.
An appropriate depreciation of the renminbi can stabilize foreign trade, especially exports to developed countries.
But this is not a reason to short RMB arbitrage, especially under the current global wave of dollar removal, holding RMB is a better choice to balance safety and value than other currencies.
3. The premise of RMB internationalization is that the exchange rate should remain stable and avoid big rises and falls, so the possibility of a trend rise or fall in the RMB exchange rate this year is basically non-existent.
Whether it is 7, 7.2, or other so-called thresholds, the national level must have prepared accordingly in advance.
Generally speaking, China's economy will still focus on stability, and seek progress while maintaining stability as the main line and planning ideas.
In the same channel as the main line and planning of the country, safety first, seeking stability and progress, is the most ordinary individuals and families, the best strategy.
The wind is high and the waves are urgent, the price of sea goods will inevitably rise, do not be greedy, avoid the wind and waves, eat light, is a rational choice.
The above is a special in-depth analysis and discussion content on the latest trends of the Chinese RMB exchange rate in May 2023, and exchanges and shares with readers and friends.
Image source: Toutiao Gallery
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