The RMB exchange rate breaks "7"!What are the effects?Ten Questions and Ten Answers

On September 15th, Beijing time, in the foreign exchange market, the offshore RMB against the US dollar fell below the integer mark "7". After a lapse of more than two years, the exchange rate of the RMB into the US dollar has once again entered the "7" era.

What will happen in the future? What will have the impact after "Breaking 7"?

The country is the official and authoritative point of direct traffic to launch the "Ten Questions and Ten Answers":

1. Is the RMB's exchange rate of the US dollar break the "7"? What should we think?

The country is through the traffic: the RMB exchange rate breaks the "7". It is really not as serious as everyone thinks. It is just a price and it will definitely rise. This is inevitable.

When the RMB broke the "7" in 2019, the central bank said that the RMB exchange rate was "breaking 7". This "7" was not age. 7 "more like the water level of the reservoir. It is higher during the period of rich water. When it is dry, it will fall again. It is normal to rise and fall.

Everyone must realize that the RMB exchange rate does not have the basis of long -term depreciation, nor will there be unilateral markets that have been declining or rising.

Even if this time it is broken, in the future, with the stability of the domestic economy and the use of the US dollar index to recover the use of some tools, it is also inevitable to return to the "6" range.

In fact, the impact of exchange rate rise and falling is already an old topic, and the exchange rate depreciation has advantages and disadvantages. Moderate depreciation is conducive to improving the competitiveness and price advantages of export trade, and promoting the recovery of the real economy, but the import costs of imported enterprises will increase.

For example, China ’s export trade in China’ s shoes, boots, textiles and clothing, and leather bags occupy a large share, and the moderate devaluation of the RMB may benefit from companies in these industries. On the other hand, industries that need to import raw materials, goods, and services from overseas, and companies that carry more US dollar bonds may be negatively affected.

2. On September 6, the central bank reduced the foreign exchange deposit reserve rate of financial institutions by 2 percentage points. Why did the exchange rate continue to depreciate?

The country is through the traffic: First of all, the central bank announced on September 6 the news of foreign exchange "interest rate cuts", rather than executed that day. Starting on September 15, 2022, the central bank will reduce the foreign exchange deposit reserve ratio of financial institutions by 2 percentage points, that is, the foreign exchange deposit reserve ratio is reduced from the current 8%to 6%.

Therefore, in recent days, foreign exchange "interest rate cuts" are more of signal effects, and they are "shouting" to the market. If irrational depreciation occurs, the official will not sit down.

3. Is the renminbi depreciation and more worthless? Will the depreciation increase the cost of import, which will lead to rising prices?

The country is through traffic: The "valuable" depreciation of the renminbi is only reflected in the purchase of the US dollar with RMB. When import settlement needs to be used in the US dollar, the import cost will indeed increase.

However, please note that if imported settlement is used in euro, yen, and pounds, the recent cost is decreasing, because the renminbi is actually appreciated than these currencies.

As for the problem of rising prices, most of the Chinese CPI composition can be used for it. It can be self -sufficient in China. The depreciation of the RMB on the US dollar exchange rate has a small impact on our own prices.

4. Regardless of whether it is up or down. If I only use RMB to consume in the country, is the depreciation of the RMB exchange rate not affecting me?

The country is through the traffic: not necessarily. If you consume products in China, it is imported through the US dollar, or its parts are purchased with US dollars, the cost of RMB depreciation may be transferred to the price you want to buy, which will become expensive.

For the easiest example, if you pass the cross -border e -commerce Haitao in China, if you finally consume in the US dollar, it will have an impact on you.

5. The dollar has been printed so much, why is it worthwhile? Is the US dollar appreciating the major currencies around the world?

Country is through traffic: four words, US dollar hegemony. Former US Treasury Secretary Connery said: "Our dollar, your troubles."

Generally speaking, the money is definitely not worth the money. However, the key issue is that the US dollar has occupied an absolute monopoly position in various fields such as global trade, payment, finance and foreign exchange reserves.

Then, the "water" released by the Federal Reserve is actually digestion globally. In terms of interest rate hikes, the US dollar returns to the local market, pushing up the price of the dollar.

6. Not only is the renminbi depreciating, but the currency of other countries is also depreciating the US dollar. Will the increase in import costs allow "buying the whole people"?

The country is through the traffic: "It is not only the RMB is depreciating." It is indeed the current status quo. As mentioned earlier, the euro, yen, and pounds fell to RMB. Therefore, the RMB is actually appreciated compared to these non -US currencies.

The price advantage and product advantage are important factor in determining business. At this time, the competitiveness of exports must be seen, and specific analysis should be performed based on different industries.

As for the increase in the cost of imports, on the one hand, the products in our CPI composition can basically be self -sufficient, so as not to worry too much; on the other hand, there are some products that have increased the cost of exchange rate changes. China is in the supply of many necessities in life. There is a set of pricing mechanisms. The final price after the pricing mechanism is not necessarily required to pay for the whole people.

7. RMB continues to depreciate, will the funds "run" out? The country is through the traffic: It is undeniable that in this wave of depreciation of the RMB, there will definitely be some funds to go out, but these funds generally have short -term investment purposes or even have a speculative mentality. Now, the Chinese foreign exchange market Running normally, cross -border funds flow is also orderly.

Zheng Wei, deputy director of the Foreign Exchange Bureau last weekend, said that at present, China's cross -border capital flow is generally stable, and domestic foreign exchange supply and demand have remained basically balanced. The long -term good fundamentals of China's economy have not changed, and continue to attract direct investment and flow in the purpose of medium and long -term asset allocation.

In the first half of 2022, China's direct investment net inflow was 74.9 billion US dollars, of which a net inflow of direct investment in China showed a strong attraction of foreign investment in the Chinese market.

8. The United States has been raising interest rates recently. Is it time to buy US dollars for financial management and gold?

The country is through the traffic: Indeed, the interest of the US dollar deposits of some banks is already high, but it should be noted that the US dollar deposit high interest rate does not mean that they can enjoy high returns, because the final income must also consider changes in the exchange rate.

For example, assuming that the current US dollar deposit is 3.5%of the interest, if this year, the RMB to the US dollar as long as the US dollar is appreciated by 4%, which is about 6.6. The handling fee is the same, and the bamboo basket is empty.

Moreover, the elasticity of the two -way fluctuations in RMB is now increasing. The level of 6.6 will appear three or four months ago. It is possible to rise back in the next year. Therefore, do not go to the gambling rate, because no one is accurate.

As for gold, everyone feels that it is a good asset of hedging, but it is not a risk -free asset for the depreciation of the RMB exchange rate. The whole international situation and the trend of the dollar.

9. Why does the exchange rate stabilize the foreign exchange reserve? How does this work work?

The country is through traffic: The essence of the exchange rate of the RMB to the US dollar is the price, the price is determined by the supply and demand relationship. If the foreign exchange reserve ratio is reduced, the US dollar liquidity will be released. So expensive.

10. The RMB exchange rate "breaks 7", what else does the central bank have to regulate the exchange rate tools?

The country is through the traffic: the central bank of any country will let the country's currency appreciate quickly or depreciate quickly.

There are many "toolboxes" of the People's Bank of China's monetary policy. It is also very experienced in dealing with speculation in the foreign exchange market. The short "fighting" of the short "battle" of the RMB exchange rate in the past few years has returned triumphant.

In addition to the foreign exchange risk reserve ratio that has been launched, at present, the central bank's tools for preventing the rapid depreciation of the exchange rate include counter -cyclical factors, foreign exchange deposit reserve ratios of financial institutions, and macro -prudential coefficients of cross -border investment financing.

Source: Country is through traffic

Edit: Wang Bomi

Editor in charge: Shi Wei

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