2015. RMB depreciation? Forget it!

Some people joked that foreign trade people have a dream in their hearts - the devaluation of the renminbi! This is of course a joke, but it does reflect the adverse impact of the appreciation of the RMB on the foreign trade industry in recent years.

After experiencing the wave of RMB appreciation in the second half of 2014, the RMB depreciated slightly against the US dollar in early 2015, and analysts have also predicted that the RMB will likely go out of the market in 2015. devaluation. This is undoubtedly a blessing in disguise for the weak export of foreign trade.

At the press conference of the State Council Information Office held on January 23, Pan Gongsheng, deputy governor of the central bank, said that the new version of the European Central Bank's QE policy and the normalization of the US quantitative easing policy will further promote the dollar exchange rate. The strengthening of the RMB may put downward pressure on the exchange rate of the RMB against the US dollar.

However, since the two sessions, the RMB has stabilized and rebounded, and its strong posture has returned. The deputy governor of the central bank said in an interview with the media during the two sessions, "The US dollar is the strongest currency, and the renminbi should be regarded as the second strongest currency. It can go up or down."

Recently In an exclusive interview with the Financial Times, Premier Li Keqiang stated more clearly that the renminbi is currently at a generally stable level and does not want to see the renminbi continue to depreciate.

It seems that the dream of foreign trade people is difficult to realize in 2015! What is the logic behind the policy makers' clear support for the RMB?

The first of course is the requirement of RMB internationalization. Renminbi internationalization is one of the key strategies of China's economy. It has been reported that in 2015, the pilot program of RMB capital account convertibility will be opened. It can be seen that the process of Renminbi internationalization has come to an end. Of course, policymakers do not want to fall short. . Internationalization has to be supported by a strong renminbi. If the renminbi depreciates rapidly, even against non-US dollar currencies, it will seriously affect the internationalization of the renminbi, and may even lead to a sudden termination of the internationalization of the renminbi.

If this happens, the decision-making level is not willing to see it. In particular, to realize the grand "One Belt, One Road" strategy, a strong RMB is needed to support it. It is impossible for a depreciated RMB to achieve this goal. The current AIIB is also very dependent on a strong renminbi as its backing.

The second is the devaluation of the RMB, especially the sharp depreciation of the RMB, which may cause a large amount of domestic funds to flow out of China. Judging from the recent situation, not only has foreign exchange reserves decreased by more than 100 billion yuan since the beginning of this year, but also the foreign exchange holdings in the first quarter increased by 1.04 trillion yuan year-on-year. This may be the result of domestic funds flowing out of China or companies holding foreign currencies and not selling them. If a large amount of capital flows out of China, it will not only affect China's macroeconomic policies, but also affect domestic and foreign confidence in the Chinese economy. In this case, the Chinese government certainly does not want the RMB to depreciate.

In addition, a strong currency value is a symbol of a country's economic strength. At the critical moment when the decision makers are deploying Chinese capital and Chinese enterprises go out, they hope to maintain a strong currency to shape the image of an economic powerhouse.

Of course, as Premier Li said, maintaining a strong RMB is also a means to force China to change its current situation of relying on exports instead of expanding domestic demand, and to achieve structural adjustment of China's economy.

In the long run, China's economy needs to be driven by domestic demand and there are reasons to maintain a strong currency. Export and foreign trade enterprises will not be able to withstand the pain of scraping bones to cure poison and die. So, what to do?

First of all, it is necessary to accept the reality that the renminbi remains the "second strongest". The U.S. dollar has entered an appreciation cycle and will continue to appreciate in 2015. As a currency with a "soft peg" to the U.S. dollar, the RMB may remain stable or even depreciate slightly against the U.S. dollar. But against other major currencies such as the euro and the Japanese yen, the appreciation of the renminbi will be quite astonishing. In just one year, the euro and the yen have depreciated by nearly 20% against the RMB. This is a skinny for export companies!

For a period of time from 2015 onwards, the euro and the yen should continue to depreciate against the RMB due to their quantitative easing policies. This situation is important for companies whose main target markets are Europe and Japan. , is undoubtedly very bad news. So, from a monetary perspective, the US market would be more profitable.

In the past two years, emerging economies such as the BRICS countries, which were highly touted in the past two years, were quickly brought back to their original shape under the great cycle of dollar appreciation. Brazil, Russia, India and other countries have experienced serious economic slowdown and inflation. Enterprises should be cautious when exploring these markets.

All parties agree that in 2015, the RMB exchange rate trend will be relatively flat, and the probability of two-way fluctuations will be relatively large. Therefore, export enterprises can also take a breather, not like a roller coaster. Buying too much insurance against the fluctuation of the currency value will give China's export manufacturing industry a chance to breathe.

However, the reality that the competitiveness of the low-end foundry industry has weakened has already taken shape. We must not squander the current precious window period. Instead, we should seize the time to transform and upgrade. In other respects, it aims to improve its own competitiveness, and find a new foundation to settle down in the international market.