Exchange rate fluctuations will be the norm and export companies must develop their internal skills early

Relevant institutions found in surveys that export companies prefer a stable RMB exchange rate than a slight depreciation of the RMB. Industry insiders believe that the expansion of RMB exchange rate fluctuations will have the biggest impact on export companies: they are at a loss when receiving orders and have difficulty making clear expectations for the trend. To deal with such problems, companies need to develop new marketing methods and make good use of financial channels.
Entering June, the trend of RMB depreciation continues. The latest data from the China Foreign Exchange Trading Center showed that on June 3, the central parity rate of the RMB against the U.S. dollar was reported at 6.171, down 15 basis points from the previous trading day and hitting a new low in the past nine months.
Analysts interviewed by reporters said that the RMB exchange rate broke the expectations of unilateral appreciation and depreciation, which is conducive to promoting the formation of a market-oriented exchange rate mechanism. For now, the RMB exchange rate is approaching an equilibrium level, and the May Purchasing Managers Index (PMI) data also shows some signs of stabilization in the Chinese economy. However, exchange rate fluctuations will remain the norm, and export companies should speed up their development of internal capabilities to deal with exchange rate risks.
​Paving the way for exchange rate reform
According to data released by the China Foreign Exchange Trading Center, the central parity rate of the RMB against the U.S. dollar on June 3 was 6.171, down 15 basis points from the previous trading day. This means that the central parity rate of the RMB against the U.S. dollar once again hit a record high since September 9 last year. new low. At the end of May, the RMB exchange rate against the U.S. dollar had just experienced several rounds of fluctuations, and on May 26 and May 29, it hit 6.1699 and 6.1705, respectively, setting the lowest record in the past nine months. “Such depreciation can break expectations of unilateral appreciation or depreciation.” HSBC China macroeconomic analyst Ma Xiaoping said in an interview with a reporter from International Business Daily that the fluctuation of the RMB between appreciation and depreciation will be the normalization of the exchange rate of the RMB against the US dollar. trend.
Looking back at the trend this year, the exchange rate of the RMB against the US dollar has generally weakened, but the overall weakening has been accompanied by an increase in fluctuations in appreciation and depreciation. In February, the RMB exchange rate turned from appreciation to depreciation. Since then, the intraday fluctuations of the RMB spot exchange rate have increased significantly. The intraday high and low price differences are mostly above 150 basis points. In the first half of May, the average was 134 basis points. Recently, the high and low price differences have gradually converged. It fell to 30 to 40 basis points on Monday.
Ma Xiaoping analyzed that the expansion of the fluctuation range of the RMB exchange rate is conducive to promoting the reform of the market-oriented exchange rate formation mechanism.
Market analysts also believe that the expansion of exchange rate fluctuations can reduce interest rate spreads, compress arbitrage space, and can play a certain role in curbing speculative behaviors such as false trade. At the same time, the market’s willingness to hold RMB is also declining. The latest statistics from the State Administration of Foreign Exchange show that in April 2014, banks’ foreign exchange settlement and sales surplus was 59.7 billion yuan (equivalent to US$9.7 billion), a decrease of more than 70% from the previous month. The latest data released by the central bank also showed that new foreign exchange holdings by financial institutions fell to 116.9 billion yuan in April, the lowest level since September last year.
Export companies must develop their internal skills early
“In fact, from the perspective of foreign trade companies, it is detrimental to them.” Zhang Li, deputy director and researcher of the Comprehensive Strategy Research Office of the Ministry of Commerce Research Institute, said in an interview with a reporter from International Business Daily that a survey of many export companies showed that Compared with the relative depreciation of the RMB, the general mentality of export companies still hopes that the RMB exchange rate will be stable.
Zhang Li analyzed that the expansion of RMB exchange rate fluctuations will have the biggest impact on export companies: they will be more confused when receiving orders and find it difficult to make clear predictions about the trend. This will also make foreign companies hesitant when placing orders. “This is also an important reason why there are many short-term orders and few long-term orders among enterprises today.”
However, market analysts believe that the RMB exchange rate is approaching equilibrium, and the May PMI data also shows that the market’s expectations for China’s economic stabilization have strengthened, and there will be no significant appreciation or depreciation in the short term. However, Wen Bin, director of macroeconomic research at the Institute of International Finance of the Bank of China, told a reporter from the International Business Daily that under the premise of opening up the current account, the RMB exchange rate is close to the equilibrium level. This is a stage, “but the RMB needs to reach a true equilibrium state.” “The goal of achieving two-way fluctuations also depends on the opening up of capital projects.”
Ma Xiaoping said that from a technical perspective, although the trade surplus is smaller than before, the surplus is still there. Although the domestic economic growth rate has slowed down, it is generally in a stable state. “Judging from these factors, they also support the stabilization of the RMB. The central parity rate of the RMB against the US dollar is expected to remain around 6.14 at the end of the year.” “Export companies can no longer rely on exchange rate advantages.” Zhang Li pointed out that in the long term, the RMB exchange rate will be volatile, and export companies must develop their internal skills early to improve their ability to deal with exchange rate risks.
Zhang Li suggested that export companies should, on the one hand, reduce costs by improving processes, improving management, business outsourcing, and improving production efficiency, and open up new marketing channels through e-commerce and establishing channels directly overseas to win foreign orders and retain customers. ; On the other hand, we should learn financial operation knowledge as soon as possible and improve our ability to use financial instruments to calmly deal with exchange rate fluctuations.