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2023 is coming, and the trend of RMB depreciation will continue to advance. According to non-timid forecasts, the RMB exchange rate may fall to the level of 8 or even 8.5! Observations from Sina Finance's onshore USD-RMB chart show that the pressure on the renminbi to continue to depreciate is increasing. If the trend in 2022 closes higher as this year, then the yuan may gradually get rid of the bottom shock and move towards the gate of 8!
Looking back at the epidemic period in 2020-2021, the RMB appreciated at one point. Is there any reason? During that time, China took the lead in controlling the epidemic and quickly resumed production. China's manufacturing industry is booming, overseas export orders are pouring in, and the economy is recovering rapidly.
Not only exports, but also overseas investment has grown significantly!
However, during this period, the United States, Europe, India, Brazil and Southeast Asia and other countries due to the epidemic, factories could not operate normally, economic data showed weakness. Overseas money poured into China, causing the renminbi to appreciate and the exchange rate to rise.
However, after the early lifting of the lockdown of other countries around the world in 2022, many overseas orders began to shift, so that the renminbi began to depreciate and signs of international capital withdrawal began to appear.
In 2023, overseas export orders will decrease, and the depreciation trend of RMB will continue.
For property developers, this depreciation momentum will put enormous pressure on dollar debt and even increase the risk of default. However, once house prices are opened up and down, they may fall sharply, causing a huge impact on the banking system.
China's foreign exchange reserves are about $310 billion, but how much debt is there? According to data released by the State Administration of Foreign Exchange, it is about $271 billion. You can use your brain to calculate what the actual foreign exchange reserves are.
If the renminbi continues to depreciate, it may trigger a psychological cue that foreign capital will continue to bet on depreciation.
People's expectations are influenced and it is easy to form expectations of depreciation. Just like the Argentine peso, once people lose confidence in a certain currency, they will sell that currency and buy dollars!
This situation is especially acute for economically unsound countries, especially those pegged to the US dollar! It is important to note that when the currency is depreciated, do not use foreign exchange reserves to maintain the exchange market, especially in countries whose exchange rates are pegged to the dollar, which can easily cause a crisis.
Once the dollar's foreign exchange reserves are depleted and insolvent, it will trigger a financial and economic crisis. Countries such as Argentina, Lebanon, Egypt, Pakistan, Sri Lanka and other countries are typical cases!
The use of foreign exchange reserves to maintain foreign exchange markets while suffering from currency depreciation has led to the depletion of foreign exchange reserves and a severe shortage of United States dollars, leaving imported goods in ports and Governments unable to pay for the dollar requirements for these goods.
Impact of RMB depreciation on China's economy: Domestically, RMB depreciation will improve the competitiveness of export products and help expand exports. This is good news for Chinese manufacturing and export-oriented companies.
In terms of international trade, a depreciation of the renminbi above 8 will reduce imports. Due to the depreciation of the renminbi, the price of imported goods will rise, and domestic consumers' demand for imported goods will decrease.
However, as the price of imported goods rises, it may lead to an increase in the cost of living for domestic residents, triggering inflation. In addition, the depreciation of the renminbi will also cause international capital and investment to flow out of China, triggering financial market instability. The government needs to moderately slow down the depreciation of the renminbi to maintain economic stability and sustainable development. The possible acceleration of the depreciation of the renminbi has aroused widespread concern and controversy. We need to keep an open mind to deal with the vagaries of exchange rate risk and the challenges and opportunities ahead. Maintain an optimistic attitude, look at exchange rate fluctuations rationally, and jointly create a new era of prosperity and stability of the economy!
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