After ending a wave of “six consecutive declines”, the RMB exchange rate finally rebounded. Market participants expect that the RMB exchange rate will enter an appreciation channel in the second half of the year. Facing the pressure of appreciation, foreign trade companies need to improve their internal skills and create new advantages.
On July 21, the central parity rate of the RMB against the U.S. dollar was reported at 6.1547, an increase of 21 basis points from the previous trading day, ending the “six consecutive declines” trend. Since the beginning of this year, the RMB exchange rate against the US dollar has depreciated from 6.0990 at the beginning of the year to 6.1568 on July 18, a depreciation of 578 basis points from the beginning of the year. Market analysts believe that the RMB depreciation trend formed in the first half of the year will come to an end, and the RMB exchange rate will enter an appreciation channel in the second half of the year with two-way floating.
Analysts said that as China’s macro economy shows a stabilizing and rebounding trend, the RMB exchange rate may appreciate slightly in the second half of the year, but the room for appreciation is limited. Foreign trade companies should seize the opportunity and accelerate the creation of new competitive advantages.
The fluctuation range increases
“The unilateral trend of the RMB in the past will come to an end and has now reached a basic equilibrium level.” Regarding the current RMB exchange rate, Wen Bin, a senior expert from the Development Planning Department of China Minsheng Bank, said in an interview with a reporter from the International Business Daily.
Recently, the National Bureau of Statistics, the General Administration of Customs, the Ministry of Commerce and other departments have successively released favorable data. On July 16, Sheng Laiyun, spokesperson of the National Bureau of Statistics, said at a press conference that the national economy was generally stable in the first half of the year. But the exchange rate of the RMB against the US dollar does not seem to be guided by these data explaining China’s economic fundamentals. Why?
Wen Bin said that from the perspective of economic fundamentals, the internal and external economic environment is changing. Exchange rate changes are affected by both the domestic economic situation and the U.S. economic trend, and the exchange rate market is more sensitive to the macroeconomic response. For example, data released by the U.S. Department of Labor showed that non-farm employment increased by 288,000 in June, exceeding market expectations by more than 70,000, and the unemployment rate fell to 6.1%, a new low in the past six years.
Looking back at the exchange rate trend since the first half of the year, it has changed from continuous depreciation to fluctuation. On January 14, after the central parity rate of the RMB exchange rate against the US dollar rose to a historical high of 6.0950, it showed an overall rapid depreciation trend amid fluctuations. On June 3, the quotation of 6.1710 stood at the peak position on the central parity rate chart of the RMB against the US dollar this year and fell to the lowest. From June 5th to 10th and from July 7th to 10th, the central parity rate of the RMB against the US dollar rose sharply from 6.1708 to 6.1451 and from 6.1658 to 6.1443 respectively, which widened the floating range of the RMB exchange rate against the US dollar.
Based on the rapid appreciation of the RMB exchange rate against the US dollar, as well as improving economic data such as China’s foreign trade and purchasing managers index, market analysts believe that the RMB exchange rate will enter an appreciation channel in the second half of the year. So, how should Chinese export companies respond?
Foreign trade pressure is still high
“As the exchange rate fluctuation range increases, the differences between actors on the trend of the exchange rate are also increasing.” Wen Bin said that on the one hand, China’s economy is stabilizing and recovering, and economic fundamentals will drive the appreciation of the RMB; on the other hand, , the U.S. economic recovery, further balancing of the international balance of payments, and the rapid contraction of foreign exchange outstanding will limit the motivation for the continued appreciation of the RMB. “It may fluctuate between 6.1~6.3.”
Bai Ming, deputy director and researcher of the International Market Research Department of the Research Institute of the Ministry of Commerce, said in an interview with a reporter from the International Business Daily that the biggest driving force for the development of foreign trade in the second half of the year is the State Council’s promulgation of “Several Opinions on Supporting the Stable Growth of Foreign Trade” and various Ministries and commissions, as well as local provinces and cities, have issued detailed implementation rules. “By promoting customs clearance convenience, reducing service costs, and improving service efficiency, we can have a real promotion effect on foreign trade.”
In addition, there are many favorable factors, such as the development of cross-border e-commerce, BRICS cooperation, the creation of an upgraded version of the ASEAN Free Trade Area and free trade area negotiations, the Shanghai Free Trade Pilot Zone, the “Silk Road Economic Belt” and The promotion and implementation of strategies such as the “21st Century Maritime Silk Road”, the Yangtze River Economic Belt, and the integration of Beijing, Tianjin, and Hebei will all bring impetus to the growth of foreign trade. “However, there is still great pressure on foreign trade growth in the second half of the year.” Bai Ming said that according to calculations, if the original foreign trade growth target is to be achieved, it is equivalent to maintaining an average growth rate of 15% to 16% every month in the second half of the year. Although the European and American markets are recovering, the impact of spillover effects on China is weakening. “The benefits of high-end industries remain in China and South Korea and other places, while most of the low-end ones spill over to Southeast Asia, and China faces challenges.” “In fact, foreign trade is under great pressure, and it is difficult for the RMB exchange rate to appreciate significantly.” Bai Ming said that in the face of these favorable and unfavorable factors, foreign trade companies should strengthen their confidence, and while accelerating the learning of financial operation methods, they should also seize favorable opportunities to accelerate We will step up the pace of transformation and upgrading and seize the opportunity to create new competitive advantages.
