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On the evening of December 28, Chinese assets collectively soared, Chinese concept stocks rose, and the Nasdaq China Golden Dragon Index once rose more than 3%. At the same time, the renminbi continued to rise, and the FTSE A50 China Index futures continued to expand. Among them, the offshore yuan rose to 7.1006 against the US dollar during the day, up more than 500 points; FTSE A50 China Index futures extended gains as much as 2.7% at one point.
On the news, on the evening of December 28, according to the People's Bank of China, the central bank's monetary policy committee held a regular meeting for the fourth quarter of 2023, which pointed out that a prudent monetary policy should be flexible, moderate, precise and effective. It is necessary to seek progress while maintaining stability, promote stability through progress, intensify macroeconomic policy regulation and control, and constantly consolidate the foundation for stability and improvement. We will accurately and effectively implement a prudent monetary policy, pay more attention to counter-cyclical and cross-cyclical adjustments, give better play to the dual functions of monetary policy tools, and strive to expand domestic demand, boost confidence, and promote a virtuous cycle of the economy.
The meeting held that it is necessary to intensify the implementation of the monetary policy that has been introduced. Maintain reasonable and abundant liquidity, guide the reasonable growth and balanced distribution of credit, and keep the scale of social financing and money supply in line with the expected targets of economic growth and price levels. Enhance the guiding role of government investment and policy incentives, improve the multiplier effect, and effectively stimulate more private investment.
-- The size of China's foreign exchange reserves
In recent years, the size of the mainland's foreign exchange reserves has been at the level of $3 trillion. Since 2022, foreign exchange reserves have shown a downward trend, with the lowest amount of foreign exchange reserves at $3.03 trillion at the end of September 2022. As of the end of January 2023, the size of the mainland's foreign exchange reserves was US$3,184.5 billion, an increase of US$56.8 billion, or 1.82%, from the end of 2022.
In January 2023, affected by global macroeconomic data, monetary policy expectations of major economies and other factors, the US dollar index fell, and global financial asset prices rose overall. Factors such as exchange rate translation and changes in asset prices combined to increase the scale of foreign exchange reserves in the month. The mainland's economy continues to recover and show an upward trend, and the endogenous driving force continues to increase, which is conducive to maintaining the basic stability of the scale of foreign exchange reserves.
-- Changes in the RMB exchange rate
From January 2021 to March 2022, the exchange rate of the US dollar against the RMB was generally stable, and there was a slight downward trend, since March 2022, the Federal Reserve has continuously issued interest rate hike plans, and the US dollar has continued to rise against the RMB, reaching a peak of 7.16328 at the end of November 2022.
Ping An Securities research report said that looking forward to 2024, the pressure of RMB depreciation is expected to ease, which can make more room for monetary policy. Considering that the pivot of the US dollar index has shifted downward, and the "expected gap" of China's economy may have narrowed, and the outlook for external demand and exports is improving, it is expected that the RMB exchange rate against the US dollar is expected to gradually return to 6.8-7.0.
Wang Tao, head of Asian economic research and chief China economist at UBS, said that the yuan may depreciate again against the US dollar in the first quarter of 2024 in view of the possibility of further monetary policy easing by the People's Bank of China. China's economic growth is expected to stabilize, and the People's Bank of China (PBOC) will not cut interest rates after spring. At the same time, the US economy is expected to grow at a slower pace in 2024 and the Fed will start cutting interest rates. The expected narrowing of the yield spread between China and the United States, the expected weakening of the US dollar, and the restoration of confidence in the Chinese economy will contribute to a slight appreciation of the yuan against the US dollar. As a result, the RMB is expected to trade at 7.0 against the US dollar by the end of 2024.
Note: This article is for content purposes only and does not constitute any investment advice.
Prospective Economist APP Information Group
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