General

According to Huacheng Import and Export Data Observation, on the six trading days of 2023, the central parity rate of the RMB against the US dollar went out of the "six consecutive rises" and entered the 6.7 yuan range, reflecting the market's positive expectations for China's economic growth this year, and the market's confidence rose significantly.

On January 9, the central parity rate of the RMB against the US dollar was 6.8265, a new high since August 22, 2022, with an increase of 647 basis points. Both offshore and onshore RMB recovered 6.8 yuan in intraday. On January 10, the central parity rate of the RMB against the US dollar was 6.7611, with another significant increase of 654 basis points. This round has rebounded from the central parity rate of the RMB against the US dollar, which started in November 2022, and has risen by more than 6% since then.

In general, the main reasons for this round of appreciation of the RMB exchange rate are the recovery of China's economy, the increase of foreign capital inflows, and the increased willingness to settle and sell foreign exchange seasonally. In 2022, China's economy will withstand the pressure and maintain a stable trend. Recently, thanks to the remarkable effect of the policy of stabilizing growth, the accelerated recovery of economic activities, and the more premium given to China's assets and even the RMB exchange rate, the RMB exchange rate has been able to take the lead in a basket of currencies.

The increase in cross-border capital inflows provides strong support for the RMB exchange rate. The optimization and adjustment of the epidemic prevention and control policy has also made all sectors have more optimistic and positive expectations of China's economic outlook in 2023, and the attractiveness of the market and investment has further improved. According to the observation report of Huacheng Import and Export Data, in the first week of 2023, the accumulated net purchase of northbound funds in the stock market was 20.019 billion yuan. At the same time, exporters' seasonal collection and settlement of foreign exchange will also strengthen the RMB exchange rate before the Spring Festival each year.

In addition, due to the weakening of the expectations of the Federal Reserve to raise interest rates and other factors, the US dollar index has continued to fall in the near future, which is also one of the driving forces for the strength of the RMB. The purchasing managers' index of manufacturing and non-manufacturing industries in the United States continued to decline, and the risk of a hard landing of the economy increased. According to Wind data, since November 2022, the US dollar index has fallen by more than 6%. Huacheng Import and Export Data Observation reported.

Since the end of 2022, the RMB exchange rate has rebounded sharply and the inflow of foreign capital has continued to grow, which fully reflects that the international financial market is firmly optimistic about China's economic development and is full of confidence in economic fundamentals such as prices. In the medium and long term, the RMB exchange rate will maintain two-way fluctuations, but will continue to strengthen on the whole. For market entities and regulatory authorities, the next step is to further strengthen the risk-neutral awareness, do scenario analysis and stress test on the basis of strengthening the monitoring and early warning of the domestic and foreign economic situation and cross-border capital flow, and formulate a response plan to be prepared. Huacheng's import and export data are observed and reported.