What will be the impact of RMB exchange rate “breaking 7”?

After the offshore renminbi fell below the 7.0 mark against the US dollar on September 15, on September 16, the onshore renminbi also “broken 7” against the US dollar, the first time since July 2020. Export companies rely on the depreciation of the RMB exchange rate to increase their income, but if they use too many imported raw materials and components, they may also increase their expenditures due to the depreciation of the RMB exchange rate.

The RMB exchange rate “breaks 7”, beyond the reasonable range?

The relevant person in charge of the central bank said in response to the “break 7” of the RMB: the exchange rate of the RMB “breaks 7”, this “7” is not age, it will not come back in the past, nor is it a dam, once it is broken through the flood, it will be a thousand miles away; “7 “It’s more like the water level of a reservoir, which is higher during the wet season, and then lowers again during the dry season, with ups and downs.

“Such periodic short-term small depreciation is normal, and the RMB exchange rate fluctuates in both directions.” Dong Dengxin, director of the Institute of Finance and Securities at Wuhan University of Science and Technology, told reporters that the RMB exchange rate basically fluctuates around 6 to 7, and “breaking 7” is still Within a reasonable range, the RMB exchange rate is still stable.

This “Break 7” stems from U.S. monetary policy?

The RMB exchange rate “breaks 7” again after a lapse of two years. According to Wen Bin, chief economist of Minsheng Bank, it is mainly due to the accelerated tightening of monetary policy by the Federal Reserve to curb high inflation. With the continuous strengthening of the US dollar index, including Most of the non-dollar currencies, including the renminbi, depreciated to varying degrees.

Recently, the Federal Reserve has repeatedly signaled interest rate hikes.

The U.S. CPI rose 8.3% year-on-year in August, exceeding market expectations, and also sparked discussions about raising interest rates in the U.S. market. Recently, the U.S. dollar index has strengthened again.

Sinolink Securities believes that under the continuous divergence of policy interest rates between China and the United States, the yields of 10-year Treasury bonds between China and the United States have inverted again since August 5 and widened rapidly, which also suppressed the RMB exchange rate to a certain extent.

Will the falling RMB exchange rate benefit exporters?

In Dong Dengxin’s view, “a moderate depreciation of the renminbi may help stimulate domestic product exports. After expanding exports, it will also have a stimulating effect on economic growth.”

Sinolink Securities also stated that the devaluation of the renminbi will further enhance the price competitiveness of some industries with a high proportion of exports.

Overseas revenue from export business is also expected to benefit from foreign exchange gains, and the depreciation of the renminbi may further increase the profits of export-oriented companies.

However, Bai Ming, deputy director of the International Market Research Institute of the Ministry of Commerce Research Institute, believes that the devaluation of the RMB exchange rate is also a double-edged sword.

Export companies rely on the depreciation of the RMB exchange rate to increase their income, but if they use too many imported raw materials and components, they may also increase their expenditures due to the depreciation of the RMB exchange rate.

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