After The Entry Of SDR, The Depreciation Of RMB Is Conspiracy Theory?

The International Monetary Fund (IMF) is about to announce whether it will decide to include the renminbi in the basket of SDR currencies. David Woo, head of global interest rates and foreign exchange division of Merrill Lynch, believes that after joining the International Monetary Fund (SDR) basket, the Central Bank of China may not continue to provide support for the RMB exchange rate, and will liberalize the depreciation space.

In August 11th this year, the Central Bank of China adjusted the pricing mechanism of the central parity of RMB, followed by a significant depreciation of the RMB, and the central bank intervened in the market to provide support for the exchange rate and prevent the market from fluctuating significantly. Bloomberg quoted Woo as saying that once the RMB has successfully joined the SDR, the Central Bank of China will devalue the renminbi, especially considering that the Federal Reserve may raise interest rates by the end of the year. He said:

China can't continue to have both fish and bear's paws. Letting go of the renminbi is a necessary condition for easing monetary policy.

Diana Choyleva, chief economist and research director of Lombard Street Research, also believes that China is currently the only currency in major economies with no significant depreciation. After joining SDR, China will let the renminbi depreciate, but this will be a slow process. He said:

If the renminbi is included in the SDR, China may be inclined to gradually depreciate its currency against the US dollar. This is good news, because this will give the west the time to grow real income and let us enter a positive situation.

If the renminbi fails to be included in the SDR, the Chinese government may not wait for another 5 years. At present, China is the only country in the world's major economies that has not depreciated its currency significantly. If the renminbi is not accepted, the Chinese government may devalue the currency once and for all. This will cause a financial crisis and have an impact on the market.

After the entry of SDR, the depreciation of RMB is conspiracy theory?

But Zhu Haibin, the chief Chinese economist at JP Morgan, appears to be a "conspiracy theory" about the devaluation of the RMB after its entry into the SDR. Bloomberg quoted Zhu Haibin last week as saying that if China Central Bank Letting the yuan depreciate will increase market turbulence and damage the overall economy.

China's GDP growth rate in the three quarter was the lowest in six years. The figures released yesterday also showed that in October, China's exports declined in dollar terms, and imports fell narrower than expected.

Yi Gang, vice president of the Central Bank of China, also said last month that the yuan does not exist on the basis of long-term depreciation, and that the reform of the RMB exchange rate formation mechanism will continue to move forward in the direction of marketization. He said:

Recently, the people's Bank of China implemented the central parity of RMB exchange rate quotas to improve the market determination of the RMB exchange rate. The RMB does not exist on the basis of long-term depreciation, and the reform of RMB exchange rate formation mechanism will continue to move towards marketization in the future. The RMB exchange rate will be more flexible, floating in two directions, and basically stable at a reasonable and balanced level.

If the Federal Reserve raises interest rates in December, it will provide sufficient justification for the central bank to let go of the RMB exchange rate, because they can externally say that China's monetary policy should not be linked to the Federal Reserve.

Wall Street has previously mentioned whether the renminbi can be added. SDR The final assessment has been postponed from early November to late November. By then, IMF It will officially announce whether the renminbi will be included in the basket of SDR currencies. Goldman Sachs said it had an optimistic view of the renminbi's accession to the SDR.

After a significant depreciation in August, the yuan appreciated by 0.3% against the US dollar in September and 0.6% in October, which has depreciated by 0.6% to 6.3530 so far this month. The Bank of America expects to devalue to 6.9 by the end of next year, after Bloomberg's survey of analysts expected a median of 6.6.

In addition, the latest data released by the central bank showed that China's foreign exchange reserves increased by 11 billion 400 million US dollars to US $3 trillion and 525 billion 500 million in October, ending the trend of 5 consecutive months of decline. At the end of 9, foreign exchange reserves fell by 43 billion 260 million US dollars to 3 trillion and 514 billion 100 million US dollars in the annulus, making the total reserves in the three quarter shrink by 180 billion US dollars, the largest single quarterly decline since records.

After the reform in August 11th, many reports mentioned that the central bank used foreign exchange reserves to intervene in the market to reduce the rapid devaluation of the RMB. In the same month, the foreign exchange reserve dropped to a record $93 billion 929 million.

Subsequently, regulators adopted a number of measures, such as collecting deposits for the forward selling and foreign exchange business of banks, and the stabilization of offshore and offshore RMB markets in late September.

Woo said that despite the risk of capital outflow, China's central bank would not prevent the depreciation of the renminbi because most of the outflow of capital was used by enterprises to repay foreign debts, and this work has been completed. He said: