General

After the exchange rate of the offshore RMB against the US dollar fell below the psychological mark of 7 on the evening of the 15th, the exchange rate of the onshore RMB against the US dollar also fell below the 7 mark on the 16th. After two years, the onshore and offshore RMB exchange rates both "broken 7" again.

From the sharp decline on August 15 to the current "7", the offshore RMB exchange rate against the US dollar fell by 3.88%, and the spot exchange rate of the RMB against the US dollar fell by more than 3.9%.

Onshore renminbi: refers to the renminbi that is traded in mainland China. Expressed in Chinese Yuan, referred to as CNY; Offshore RMB: It is the RMB that is traded outside mainland China. Usually represented by "CNH".

Why does the RMB exchange rate continue to depreciate in the short term?

On the one hand, the Fed continues to raise interest rates. In the context of the appreciation of the US dollar, other reserve currencies in the SDR basket have depreciated significantly against the US dollar, but compared with other non-US dollar currencies, the depreciation of the RMB is the smallest. In the SDR currency basket, the appreciation of the US dollar and the renminbi have also appreciated, but the appreciation of the US dollar is larger than that of the renminbi. The renminbi did not see a full-blown depreciation.

On the other hand, according to the opinions of comprehensive research institutions, the current round of RMB decline since August 15, in addition to the impact of the strengthening of the US dollar, is also affected by the deepening of the divergence of monetary policies between China and the United States, and the recent pressure on domestic economic growth.

What impact will it have on international trade companies?

There are pros and cons to a devaluation of the exchange rate.

Moderate depreciation is conducive to enhancing international trade export competitiveness and price advantage, and promoting the recovery of the real economy, and its competitive advantage and profitability are expected to be strengthened; but it is relatively unfavorable for international trade imports, and the import cost of importing enterprises will increase. For example, China's export trade of footwear, accessories, textiles and clothing, and leather luggage account for a large share. A moderate depreciation of the RMB may benefit companies in these industries. In turn, industries that need to import raw materials, goods and services from overseas, as well as companies carrying more dollar bonds, may be negatively affected.

From the data point of view, since April this year, the renminbi has started a depreciation cycle, and after excluding the impact of the epidemic, international trade exports have improved since May, with exports maintaining positive year-on-year growth, while international trade imports continued to fluctuate at a low level year-on-year. It shows that the devaluation of RMB has a positive correlation with exports and a negative correlation with imports. From the analysis of country-by-country data, the depreciation of the RMB is one of the factors driving China's net exports, but the net exports are also affected by factors such as domestic economic fundamentals, the international trade environment, and the needs of importing and exporting countries.

Looking at the RMB exchange rate "breaking 7" with a normal heart

For a long time, "7" has been regarded as an important psychological barrier, and the RMB exchange rate has also broken "7" many times. For example, in August 2019 and May 2020, the RMB exchange rate broke "7" due to trade frictions and the epidemic, respectively.

In fact, after the "Break 7" in August 2019, the RMB exchange rate has opened up the flexibility to go up and down. Now, both the government and the market have greatly increased tolerance and adaptability to two-way and wide fluctuations in exchange rates. This can be confirmed from the recent market performance: this round of decline in the RMB exchange rate since August 15 has not been accompanied by market panic.

It should be noted that the RMB exchange rate "breaks 7", this "7" is not age, it will never come back in the past, nor is it a dam, once it is breached by the flood, it will pour thousands of miles; "7" is more like the water level of a reservoir, with abundant water During the dry season, it will be higher, and it will drop again during the dry season. It is normal to have fluctuations.

Everyone should realize that the RMB exchange rate does not have the basis for long-term depreciation, nor will there be a unilateral market that keeps falling or rising.

Even if it breaks "7" this time, in the future, with the stabilization of the domestic economy, the correction of the US dollar index and the use of some tools, it is inevitable that it will rise back to the "6" range.

Under the support of fundamentals, the financial management department has sufficient tools to deal with exchange rate fluctuations and has a large policy space. For example, in addition to the foreign exchange deposit reserve ratio that has been launched, at present, the central bank's tools to prevent rapid exchange rate depreciation also include counter-cyclical factors , cross-border investment and financing macro-prudential coefficient, etc.

Taking the recent example as an example, on September 5, the People's Bank of China announced that starting from September 15, it will reduce the foreign exchange deposit reserve ratio of financial institutions by two percentage points, that is, the foreign exchange deposit reserve ratio will be lowered from the current 8% to 6%. This is the second foreign exchange rate cut this year. Experts believe that the central bank's move sends a positive signal to the market, which is conducive to stabilizing the RMB exchange rate expectations and avoiding irrational overshoots.

It should be noted that the central bank announced on September 6 the news of a foreign exchange "interest rate cut", rather than executing it on that day. In addition, in recent days, the "interest rate cut" of foreign exchange is more of a signal function, and it is "calling" to the market. If there is an irrational devaluation, the official will not sit idly by. The central bank of any country will not allow its currency to appreciate or depreciate rapidly.

Export-oriented enterprises should establish the concept of exchange rate risk neutrality

Wen Bin, chief economist of China Minsheng Bank, pointed out that with the increasing marketization of the RMB exchange rate formation mechanism, the flexibility of the RMB exchange rate is also increasing.

"Over the past few years, the exchange rate of RMB against the US dollar has generally maintained a two-way fluctuation at a reasonable and balanced level. In the short term, the depreciation of the RMB will bring benefits to exporting companies, and the prices of export commodities will be more competitive, but for imports It will bring about an increase in costs." Wen Bin said.

Wen Bin believes that for export-oriented enterprises, it is necessary to establish the concept of exchange rate risk neutrality, actively use derivatives, do a good job in exchange rate risk management, and maintain normal production and operation.

Recently, there have been many buyers from non-US customers requesting price reductions, deferred payments, and cancellations of orders. Foreign trade people must pay attention to the safety of payment.