7 questions that you need to know the devaluation of the renminbi

The Chinese people who are used to the appreciation of the renminbi seem to have been "stunned" by the wave of RMB depreciation at the end of the year. According to China Foreign Exchange Network, since August 2015, the exchange rate of the RMB against the US dollar has dropped by 5%.
However, from the ten trading days of December 28, 2015 to January 13, the RMB showed an appreciation trend against the British pound, the Australian dollar and the Canadian dollar. The RMB exchange rate has bid farewell to the unilateral appreciation of the past years and the trend of the US dollar "the beginning of the horse", ushered in a new era of pluralism and change.
In this context, there are more people who exchange dollars, and those who lay out dollar assets in advance earned, and export companies are happy, but those companies that hold large amounts of dollar debt are crying...
Due to the popularity of foreign exchange purchases, some media recently said that SAFE has imposed restrictions on domestic purchases of US dollars. In response, the SAFE responded on the evening of January 13 that some banks had prior reservation requirements for withdrawing foreign currency notes of a certain amount or more after the purchase of foreign exchange, which is a normal business conduct and not a foreign exchange management policy requirement.
For the Chinese economy that is being adjusted, the depreciation of the renminbi will undoubtedly stimulate exports. In December last year, China’s exports achieved positive growth, which was not unrelated to the depreciation of the RMB exchange rate. At the same time, regulators are also considering the impact of continued devaluation on capital outflows, China's capital markets and the real estate market.
How long will this devaluation last? Where will the new exchange rate era take us? How do ordinary people defend their money bags? For a variety of focus issues, Xiaobian collects information to answer your questions.

Q1. What is the RMB depreciation space?
Since the reform of the exchange rate mechanism in August last year, the exchange rate fluctuation of the RMB against the US dollar has increased. Under the influence of various factors at home and abroad, whether the exchange rate, which is one of the leading prices of finance, will depreciate, and how much space for depreciation has become one of the topics that the market pays close attention to.
Li Jianjun, assistant general manager of the strategic investment and development department of Kunlun Bank, believes that under the current international economic background, the Fed is in a rate hike cycle, while the renminbi is still in a loose cycle, and the spread between the two is narrowing to the RMB exchange rate. The space under the correction.
Li Jianjun said that the revision of the renminbi is under control. He believes that once the exchange rate has experienced a sharp and rapid depreciation, the damage to the economy is very large. In the process of exchange rate correction, the central bank should also need to intervene in the exchange rate to combat the "herd effect" of speculation. Moreover, it is not only China that is maintaining its own exchange rate, but countries such as Japan and the United States are doing this.
On the other hand, in the long run, China's economy itself has no major problems. Assuming that the economic growth rate drops to 6.5%, and the country is also a high growth rate globally, the RMB is still a currency with investment value and attractiveness. At the same time, the country continues to promote financial reforms, and through the establishment of free trade zones and other means, to improve the degree of capital project development, so that the renminbi is larger and wider in the international arena, and enhance international recognition.
A number of experts have predicted that the exchange rate of the RMB against the US dollar in 2016 may reach 6.8 or even 7. Li Jianjun believes that the exchange rate to 7 is already the limit, because the Chinese economy is generally good, it is difficult to have big changes to bring such a big impact on the exchange rate.

Q2, is the revision of the exchange rate oversold for many years?
Since the global economic crisis in 2008, countries around the world have adopted currency depreciation measures to boost their economies. Among them, the United States began to depreciate the US dollar in 2008, while the euro and the Japanese yen began to depreciate sharply in 2014.
Guo Zejun’s chief macro analyst Ren Zeping’s research report shows that as of July 2014, the US dollar index appreciated by 23%, the euro depreciated by 18%, and the RMB central price only depreciated by 6.4%. Internationally, the voice of China’s exchange rate overvaluation is endless.
Many market and analysts believe that the depreciation of the Renminbi is to correct the previous overvaluation.
Deng Haiqing, chief economist of Kyushu Securities, believes that the depreciation of the RMB since August 2015 is mainly caused by the overvaluation of the RMB exchange rate and the “asset shortage”.
Deng Haiqing said that, first of all, the renminbi will be highly overvalued against the US dollar, because European and American countries, emerging market countries and other currencies have a devaluation of 5%-10% or more relative to the US dollar in the year before August 2015. The renminbi has not depreciated against the US dollar, forming a “block lake” with an overvalued renminbi exchange rate.
In the process of repairing the valuation of the renminbi in the market, will it reproduce the possibility that the exchange rate market of emerging countries has been trampled on and even collapsed. Deng Haiqing believes that the depreciation of the renminbi is different from the baht and ruble of the year, and there is no possibility of a collapse. In 2015, China's economic fundamentals did not fall much. The depreciation of the renminbi was neither an external debt problem nor a serious deterioration of the real economy. Therefore, the renminbi will not depreciate sharply, and there is no possibility of a large capital flight leading to economic collapse.

Q3, the economic downturn triggered?
Some market participants point the incentives for the depreciation of the renminbi to the downward pressure on the domestic economy.
Sang Baichuan, dean of the Institute of International Economics of the University of International Business and Economics, believes that it is actually the influence of factors at home and abroad. "On the one hand, the current domestic manufacturing capacity is seriously overcapacity, facing the process of de-capacity and destocking. Many enterprises have slowed their investment growth rate and the rate of foreign investment transfer has become faster. On the other hand, the international dollar has strengthened and the world is in conflict. In order to avoid risks, the demand for the US dollar will increase, which will aggravate the decline of the RMB against the US dollar."
Xiao Lei, the chief researcher of the gold wallet, said that the downward pressure on the economy is a long-term fundamental. The main reason for the depreciation of the renminbi against the US dollar is that the “mid-price reform” is too late. Xiao Lei said that China's economic downturn actually appeared from 2013. At that time, the renminbi continued to appreciate passively with the US dollar. However, after the middle price reform in August last year, the renminbi has been depreciating.
"This is a normal return, not a downward pressure on the economy. Because of a technical change, 80% of the previous RMB exchange rate was linked to the US dollar, and now it is 20%, and another 80% is linked to a basket of currencies. In fact, it is foreign As the currency fell, the renminbi fell. According to Xiao Lei, with the formation of this downward trend, global investment funds saw this expectation, shorting and speculating the renminbi, leading to the continued depreciation of the renminbi at this stage.
However, Xiao Lei said that the Chinese economy is slowly adjusting, and the export market data is improving. The economy has stabilized from bottoming out. In addition, the fall in commodity prices today will help the domestic economy to stabilize and have a role in the stability of the renminbi.

Q4, is the foreign exchange reserve "bullet" enough?
The depreciation of the renminbi against the US dollar "burns" foreign exchange reserves. According to data released by the central bank on January 7, China’s foreign exchange reserves at the end of December 2015 was 3.33 trillion US dollars, down 110 billion US dollars from the end of November, the lowest level since November 2012. As the renminbi continues to decline against the US dollar, the central bank can only sell the US dollar to stabilize the exchange rate. Then, does the central bank have enough foreign exchange reserves to depreciate the renminbi against the US dollar in the coming year?
"At present, China's foreign exchange reserves are very strong enough to cope with capital outflows." Xu Hongcai, director of the Economic Research Department of the China International Economic Exchange Center, said that it should also guide the depreciation, depreciating in the range of 3%-5%, which is conducive to foreign exchange reserves. stable.
Xiao Lei, the chief researcher of the gold wallet, believes that China's foreign exchange reserves appear to be large, but compared to our consumption capacity, the current 3.3 trillion US dollar foreign exchange reserves are stretched. Every year, China's imports of crude oil and chips cost nearly 500 billion US dollars. The increase in holding gold also requires a large amount of foreign exchange reserves.
Xiao Lei estimates that since August last year, the renminbi has fallen by 6% against the US dollar, and foreign exchange reserves have decreased by $300 billion over the same period. Nearly $200 billion is used to intervene in the RMB exchange rate and capital outflows. According to the current rhythm, the annual depreciation of the renminbi is 6%-8%, and the probability of this year's foreign exchange reserves falling below 3 trillion is greater.
"There is a mutually reinforcing component between foreign exchange reserves and exchange rate depreciation. In order to control the depreciation, it will consume a large amount of foreign reserves. The sharp decline in foreign exchange reserves will also cause the RMB to depreciate." Xu Hongcai believes that to break this relationship, the central bank should guide market expectations, only Given the clear policy objectives of the market, we can boost market confidence, otherwise the cost will be even greater if confidence is shaken.

Q5, is it good for export trade?
At a time when the foreign trade situation was difficult, the depreciation of the renminbi was once given the expectation of favorable exports. According to data released by the General Administration of Customs on January 13, the export volume in December last year increased by 2.3%. China Merchants Bank believes that the foreign trade expectations in December are related to the depreciation of the RMB.
Xu Hongcai, director of the Economic Research Department of the China International Economic Exchange Center, said that the depreciation of the RMB exchange rate was mainly the depreciation of the RMB against the US dollar, which was beneficial to the United States to a certain extent. The depreciation of the renminbi against the US dollar has somewhat eased the appreciation pressure of the renminbi against the euro and the yen. From this perspective, it is conducive to exports to these countries.
However, depreciation is not always good for exports. Some foreign trade manufacturers told the media that many foreign trade orders should be signed three months in advance, and settled at the exchange rate on the day of signing. Even if the RMB depreciates sharply, the settlement amount will not change. In addition, the situation of overseas buyers pushing down prices at the time of the devaluation of the renminbi has also occurred. Before the depreciation of the renminbi, global retail giant Wal-Mart asked Chinese suppliers to cut prices.
In the view of Xiao Lei, the chief researcher of the gold wallet, the purpose of the devaluation is not to stimulate exports, but to make the export environment better and the cost lower. However, the devaluation should not be excessive, otherwise it will affect market expectations and cause capital flight, which will have a negative impact on the real economy.

Q6, how to affect the stock market and the property market?
Whether the continuous depreciation will be transmitted to the stock market and the property market, Haitong Securities believes that the exchange rate and the stock market are not simply positive or negative.
From a global perspective, when the exchange rate actively depreciates, the stock market will rise. The US example is the most typical. Since 1990, the US dollar has weakened twice. US stocks have benefited from monetary easing in the same period, showing a significant increase.
On the contrary, when the exchange rate passively depreciated, the stock market fell. From November 2007 to March 2009, due to the impact of the US subprime mortgage crisis, South Korea’s fundamentals deteriorated significantly. The Korean won was depreciated by 43% and the Korea Composite Index fell by 40%. The passive decline in the ruble at the end of 2014 also caused the Russian stock market to plummet 40%.
Li Daokui, director of the China Center for Economic Research at Tsinghua University, pointed out that the depreciation of the RMB exchange rate has an information and confidence impact on the stock market. Many investors believe that China's economy has problems and whether funds are leaving. This is a shock of confidence, not a shock of the capital chain.
In terms of the property market, from 2006 to 2015, the RMB continued to appreciate for 9 years, with a maximum increase of 32%. Coincidentally, this period is also a nine-year period in which China's housing prices have risen rapidly. Some analysts said that in the context of RMB depreciation, investors may withdraw assets from the real estate market. The past experience of foreign countries also confirms this statement.
From 2004 to 2012, Singapore's GDP growth rate hit a record high, and the exchange rate is also in the expected channel of appreciation. In this process, housing prices in Singapore have risen significantly. In the two years between 2013 and 2014, Singapore’s economic growth rate declined and the exchange rate depreciation was expected to rise. This expectation also led to a downward trend in housing prices.
Guo Lei, chief macro analyst of Founder Securities, believes that considering the empirical relationship between exchange rates and real estate prices, real estate prices are now in a sensitive period.

Q7, do you need to exchange RMB for US dollars?
Under the circumstance of the weakening of the exchange rate between the renminbi and the US dollar, international students, Haitao and the people who have recently travel arrangements feel that “money is not worth the money”, and instead exchange money urgently, some people who hold ideas of investment and financial management are also The dollar is chasing.
According to the data released by the China Foreign Exchange Trading Center, on December 14, 2015, 1 US dollar can be exchanged for RMB 6.4495, and by January 13, 2016, this value has become 6.5630 yuan. If you convert it to $1,000, you will spend an extra 113.5 yuan more than a month ago. For those who have actual needs, exchange of exchanges is clearly the immediate need.
For ordinary investors, financial planners said that the US dollar can be used as a way to decentralize the allocation of household assets, but it should also pay attention to risks, because the US dollar only has interest rate hike expectations in the future, and there are many uncertain factors in the future. In addition, for the ordinary people, the stable dollar investment channel is relatively simple, and the more likely investment channel is the bank's dollar wealth management products.
The Beijing News reporter learned from some bank financial management managers that the current US dollar savings rate and US dollar wealth management income are not high. According to the financial manager of a national commercial bank, the bank’s regular interest rate on the US dollar is only 0.75% a year, and the annualized income of the US dollar wealth management product is about 1.85%. The manager said that the interest rate of RMB savings is much higher, and there are more types of wealth management products in the RMB, and the annualized rate of return can reach 4.5%.
Yin rate network analysts believe that if you choose US dollar wealth management products, you must consider two points in advance: First, most of the bank's dollar wealth management products are long-term, to ensure that the long-term liquidity of the family is not affected before purchase; second, to be able to bear exchange rate fluctuations. risk.

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