Guan Tao: Actively Adapting To The New Trend Of Two-Way Fluctuation Of RMB Exchange Rate

Since the merger of the exchange rate in early 1994, the RMB exchange rate against the US dollar has strengthened for a long time, and by the end of 2013, the central parity has appreciated by 43%.

At the beginning of 2014, the central parity and trading price of the RMB exchange rate hit a new high since 1994.

However, as the market exclaims that the RMB exchange rate will soon enter the 5 era, since the mid February, especially since the new exchange reform in March 17th, the RMB exchange rate has changed unilaterally, showing a two-way fluctuation.

A balanced and reasonable exchange rate of RMB is the macro basis for two-way fluctuation.

The logic of the accelerated appreciation of the RMB exchange rate over the past long period, especially since July 2005, is not a reference to a basket of monetary adjustments, but because the main contradiction of China's balance of payments has shifted from the shortage of foreign exchange to the surplus of trade surplus and the rapid growth of foreign exchange reserves.

In 2007, the current account surplus based on the merchandise trade surplus reached a maximum of 10.1% compared to GDP.

Since the international financial crisis in 2008, China has accelerated the pformation of the mode of economic development, "expanding domestic demand, adjusting the structure, reducing favorable balance and promoting balance". From 2010, the proportion of current account surplus fell to the internationally recognized reasonable standard. In 2013, it was 2%, and fell to 1.8% in the first half of 2014.

This shows that the RMB exchange rate tends to be balanced and reasonable, and there is no concept of a substantial increase in the value of the renminbi.

Since 2013, although the RMB exchange rate has appreciated again and again, the forward market has gradually increased the value of the US dollar to the renminbi, that is, the depreciation of the RMB against the US dollar in the future.

This is mainly related to the spread of the foreign currency. Unconsciously, the domestic foreign exchange market has gradually approached the mature foreign exchange market state reflected by the interest rate parity theory.

Since 2010, except for a small deficit in capital account in 2012, capital account has exceeded the current account in other years, which has become the main source of China's favorable balance of payments and the increase of foreign exchange reserves.

In 2013, the ratio was 36% and 64% respectively.

In the first quarter of 2014, the current account surplus was only $7 billion, and the capital account surplus reached US $94 billion. The contribution rate of cross-border capital net inflow to the current balance of payments surplus reached 93%.

The trend of RMB exchange rate is more and more deviated from the nature of commodity prices due to cross-border capital flows, and more like assets, such as stocks and bonds, the impact of non traffic and non trading factors on exchange rate is increasing, and the factors influencing the trend of RMB exchange rate are more complicated.

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Two-way volatility will become a new normal.

On the one hand, although the RMB exchange rate has fluctuated, the fundamental factors that affect cross-border capital flows have not changed fundamentally.

In the first half of this year, China's economic growth, employment and prices were all kept at the expected target of the year.

Next, our government will continue to follow steady growth and promote reform.

We should strive to increase effective supply, constantly meet new demand, and guard against and defuse potential risks, which will help China's economy develop smoothly.

The market generally believes that the RMB exchange rate is a two-way fluctuation rather than a trend change. The financial operation of the market players to reduce foreign exchange settlement and increase the purchase of foreign exchange is an adaptive adjustment rather than a market panic.

But on the other hand, there are still many uncertainties and unstable factors at home and abroad. Under the background of China's current account balance and RMB exchange rate approaching equilibrium and reasonable level, cross-border capital flows are coming in and out, and the two-way fluctuation of RMB exchange rate will rise and fall.

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The risk of two-way fluctuation of RMB exchange rate.

The practice of the new exchange reform in March 2014 shows that when the RMB exchange rate tends to be balanced and reasonable, the exchange rate of RMB will fluctuate in two directions with the improvement of the marketization of the exchange rate.

The surplus of foreign trade does not mean that the renminbi will appreciate.

Therefore, domestic institutions should change the inertia of unilateral expectation and one-way operation, establish a correct sense of exchange rate risk, and actively manage the risk of two-way fluctuation of exchange rate.

Facing the uncertainty of exchange rate trend, we should develop the habit of hedging the risk of foreign exchange exposure instead of subjectively assuming market manipulation.

At the same time, we should also correctly understand the role of exchange rate hedging tools. We should not take exchange rate hedging as a tool to make money. Instead, we should make appropriate hedging of foreign exchange exposure based on the actual trade and investment background, lock in revenue or cost in advance, and then concentrate on the main business.