The Two Remittance To RMB Is Anti Inflation.

The real effective exchange rate has rebounded since May, and the appreciation of RMB has become increasingly evident.

In the first two years of the first year of foreign exchange reform, the yuan rose far more than the first RMB increase in the first year of foreign exchange reform.

Yesterday, the people's Bank of China (hereinafter referred to as the "central bank") announced the "two exchange reform" in June 19th last year.

And on the last trading day before the 1st anniversary anniversary, in June 17th, the central parity of RMB against the US dollar reached a record high of 6.4716.

The so-called RMB intermediate price can be simply understood as the official exchange rate of RMB.

In the industry's view, the Yuan's new high in June 17th is in the past year.

Obviously, with the severe inflation, the RMB exchange rate has become one of the policy tools to resist inflation in the last half year.

This is also a new feature since the two exchange reform.

Considering the current macroeconomic trend, this feature is likely to continue.

However, taking a look at the analysis of the industry, the new changes may also produce the obvious increase in exchange rate elasticity in the first half of this year. The elasticity of RMB exchange rate in the second half of this year is likely to increase further, in order to prevent speculative funds that are betting on the unilateral appreciation of the renminbi.

The US dollar appreciated by 5.5% a year.

From the past year, "two times"

Data show that after restarting the second trading days, the central parity of RMB against the US dollar has risen by 295 basis points, breaking through the 6.80 pass at one stroke.

Since the beginning of this year, under the background of the weakening of the US dollar, the trend of RMB exchange rate's "step by step" appreciation has become more obvious.

In January 13th, after the central parity of RMB against the US dollar broke through the 6.60 pass, it broke through the 6.50 pass again in April 29th and the RMB exchange rate entered the 6.4 era.

As of yesterday, the appreciation of the RMB against the US dollar has been close to 5.5% since the two exchange reform.

It is worth mentioning that, over the past year, the renminbi has shown a positive impact on the US dollar.

Data show that in the more than 200 trading days, the central parity of the RMB against the US dollar appreciated by 147 trading days, and the 92 trading days depreciated. In some trading days, the central parity of RMB against the US dollar reached the maximum amplitude of over 0.2% every other day, and the maximum appreciation and the maximum depreciation rate exceeded 100 basis points.

And on the second trading day after the resumption of the exchange reform, the central parity of the RMB against the US dollar has risen by 295 basis points, and the fluctuation is close to the 0.5% ceiling set by the management.

Anti inflation intentions are obvious.

Taking a look at the "two exchange reform" in the past year, the appreciation rate of RMB has increased significantly compared with the first year of "one exchange reform" (July 21, 2005), which may be attributed to the domestic inflation situation, and the RMB exchange rate has become an important means to curb inflation at the decision-making level.

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"With the number and price type of monetary instruments being used many times, the space and effect have been weakened. Practice has proved that the RMB exchange rate as an anti inflation tool must be used."

According to He Zhicheng, senior economist at Agricultural Bank of China, if there are many Chinese officials and industry market participants, if there are still many people opposed to the appreciation process of RMB in the first 3 months of this year, there will be less and less opposition, because after all, this year's top priority of China's macroeconomic regulation and control is anti inflation.

The Morning Post reporter also noted that the intention of RMB appreciation against inflation was particularly evident in May.

According to the latest data released by the bank for International Settlements (BIS), the real effective exchange rate index of the RMB in May was 118.26, rising by 1.19%, while the nominal effective exchange rate index was 111.89. The rate of decline in the first two months of the change was slightly increased by 0.14%.

What is the "real effective exchange rate"? That is, the exchange rate of the renminbi in a basket of currencies, including the US dollar and the euro.

To put it simply, the above data imply that the depreciation of the renminbi relative to the US dollar and the depreciation of the euro relative to the value of the renminbi in the past (Note: if the appreciation of the euro to the US dollar is greater), the difference is that, in general, the renminbi appreciated against all currencies in May.

According to official data from China foreign exchange trading center, the appreciation of RMB against the euro reached 3.18% in May, and the yuan rose 0.32% against the yen.

"The US dollar rebound has not suppressed the pace of RMB appreciation, which is somewhat unexpected. It may be that the central bank wants to revalue the renminbi across the board to ease the pressure on the price of imported goods from major trading partners."

One analyst interpreted the above data.

Exchange rate policy

As the RMB exchange rate has added an anti inflationary function, many experts have predicted that the renminbi will appreciate further.

For example, CICC, one of the most prospective investment banks in China, thinks that the renminbi will still face appreciation pressure in the future. The agency maintains the benchmark forecast of RMB appreciation against the US dollar 5-7% this year.

CICC also said that the rate of appreciation could be changed by the pressure of imported inflation and the exchange rate of the US dollar against other major currencies.

It is noteworthy that, compared with the forecast appreciation rate, many experts, based on the obvious enhancement of RMB exchange rate flexibility over the past year, seem to be more inclined to predict the enhancement of the RMB exchange rate and change the unilateral appreciation expectation of RMB, which will be one of the key points in the latter half of the reform.

"The reason why the RMB appreciation is not expected is mainly because of the rigid exchange rate mechanism and the substantial increase in foreign exchange reserves.

The risk free unilateral speculation has also led to the anticipated self actualization.

Guan Tao, director of the balance of Payments Division of the foreign exchange bureau, said that the core of improving the exchange rate mechanism is to further increase the flexibility of the RMB exchange rate and let the market play an increasingly important role in the formation of the exchange rate.

However, many industry insiders pointed out that the decision makers were worried that the floating of the RMB would exacerbate the current business situation of the export enterprises. In view of this, the possibility of a substantial appreciation would be very slim.