Japan's Capital Markets: The Yuan Will Fall Further 8% In The Next Two Years.

Has the renminbi's unexpected downward trend ended? Daiwa Capital Markets believes that nothing has just begun and the renminbi will further fall by 8% in the next two years.

The Japanese brokerage firm's expectation is different from most other institutions in the market. Other institutions believe that the renminbi's fall is deliberately caused by Beijing, and China's trade surplus is still expanding, so the RMB's decline will only continue for some time, and then will rebound. But he has his own opinion:

The market's sell-off has been heavy and appears to be increasing. Betting that the renminbi will continue to appreciate is undoubtedly the most active transaction in financial markets for some time. If expectations begin to change, this may lead to massive capital withdrawal from China.

　　 Big sum It is expected that by the end of this year and the end of 2015, US dollar to RMB They will touch RMB 6.5 yuan and 6.83 yuan respectively, and the US dollar will be RMB 6.2593 yuan today. This figure has increased to indicate the depreciation of the renminbi.

In the first four months of this year, the yuan fell to 3.3% against the US dollar (6.2590,0.0000,0.00%), because the Central Bank of China deliberately pushed the tightly controlled renminbi to weaken, in order to counter speculative trading in betting on RMB appreciation.

　　 RMB The duration and magnitude of this decline exceeded most expectations, and even prompted HSBC and other optimistic Chinese institutions to lower their expectations of the RMB exchange rate. The agencies said that the US dollar would be RMB 6.14 yuan at the end of 2014. This still means that the renminbi will appreciate by 1.9% over the current period.

However, he believes that there are two circumstances that are pushing the yuan further weaken. The first thing, the agency said, is that the decline of the renminbi reflects the worsening credit situation, which reflects the increasing number of high indebted enterprises experiencing loan difficulties. The second is to help businesses get loans and boost the slowing economy, the central bank has injected a lot of money into the money market to lower bond yields, but this has also pushed the yuan down.

He said that if the Central Bank of China stopped pumping money today, there could be a credit crisis tomorrow. But if the market finds that the renminbi continues to depreciate, it may turn from confusion to tension or panic.