In the past month or so, the RMB has appreciated sharply and rapidly, which makes people a little frightened, and the rise is too fast to explain, what is happening behind this?
Is it really that powerful for the dollar to pause interest rate hikes? It's hard to believe.
Let's take a look at the data of this wave of RMB appreciation, which is indeed amazing.
On December 15, the onshore and offshore renminbi briefly strengthened against the US dollar. The offshore yuan rose above 7.10 against the US dollar, with a maximum increase of more than 200 points during the day and a high of 7.0975, up more than 500 points this week.
Meanwhile, on the CNY, on 15 December, the central parity of the RMB against the US dollar was quoted at 7.0957, up 133 basis points from the previous day to the highest point since June 5, 2023.
Let's look at the data of the last month or so, at the beginning of November this year, the offshore yuan was quoted at 7.3415 against the US dollar, and since then the RMB has continued to appreciate, as of December 15, the offshore yuan has risen by more than 2,000 points against the US dollar, with a cumulative appreciation of more than 2.8%.
It's only been a little over a month, and it has appreciated all the way from 7.3415 to 7.0957.
This wave of sharp appreciation of the renminbi seems to be reasonable, but there are also many irrationalities.
We have read a lot of analyses, and we can explain why the renminbi appreciates, but we can't explain why the appreciation is so sharp?
We see that most of the analyses are for two reasons. The first is that the US dollar pauses interest rate hikes, and the market expects that the interest rate cut cycle will be ushered in in the middle of next year, so the weakening of the US dollar and the appreciation of the RMB will be the general trend.
The second is that China's economy is optimistic, as long as the chassis is in place and the RMB assets are strong, then there is a basis for the appreciation of the RMB. This seems to be very reasonable, but recently, foreign media and research institutions are unanimously not optimistic about China's economy, and even singing about it.
Not long ago, the international rating agency Moody's even downgraded the outlook of China's sovereign rating, and at the same time downgraded the rating outlook of more than 100 state-owned units or put them on the watch list, which is obviously extraordinary.
GDP growth forecasts for 2023 have been generally revised upwards, but by a small amount of no more than 0.5%. At the same time, the forecast for China's economy in 2024 is not too optimistic, for example, Goldman Sachs predicts a GDP growth rate of only 4.6%.
We believe that the foundation of China's economy is very solid and will continue to improve, but the positive news or our confidence is still not enough to support the recent sharp appreciation of the RMB.
Since we are not optimistic about China's economy, and there have been no major benefits in the near future, where does the confidence in the rapid appreciation of the renminbi come from?
There must be a demon when something goes wrong, what is the demon behind it this time?
There is an important fact here, that is, there are many people in both the onshore and offshore renminbi who are increasing their positions in the renminbi in large quantities, and to put it bluntly, they have been robbed like crazy.
This is a very simple relationship between supply and demand, the price will naturally rise if there are more people who buy it, and if there are fewer people who exchange it, how can it rise?
At the same time, there are people abroad and at home who are converting other currencies and assets into renminbi in large quantities, who are they? What do they want to do?
Speaking of which, many people should understand that under the general trend of expecting the US dollar to inevitably cut interest rates, many capital parties around the world are preparing to enter the Chinese market.
There may be American capitalists and international speculators, as well as investors from Europe, the Middle East, and even Japan and South Korea.
These people are not necessarily investing in the stock market, but may also be in other financial markets, or into technology and industrial investment, or even into the real estate market.
Whatever they want to come in for, the renminbi currency market is usually the starting point for it all.
Are they optimistic about China's economy? Long-term optimism is certain, and anyone who wants to say that China's economy is not good will be deceiving themselves and others.
However, we believe that in addition to the financial war initiated by the United States, there is more of a speculative mentality, and there have been several US dollar hikes and then interest rate cuts in history, and there has been a massive influx of US dollars, and even euros and yen, into China.
To some extent, we are the beneficiaries of international capital, and China has always been the second largest use of foreign capital in the world after the United States.
However, we have also seen that a large amount of international capital has come in, and their purpose is to make money is to suck blood, which has also objectively pushed up our real estate bubble and housing prices, and exacerbated our inflation for many years.
Every time they shrink back, they leave us with a lot of chicken feathers, such as the real estate market in the past two years and the recent stock market, which have suffered greatly.
Of course, now is the global market, we have to open up to the outside world at a high level, we can't be afraid of foreign capital coming in, the advantages of making good use of it definitely outweigh the disadvantages, who will be afraid of more money?
We welcome them to invest, and at the same time improve their own level and guard against risks, which is the right thing.
Therefore, in 2024, China's economy is ready to meet the shock wave of national capital!