No Need To Panic When RMB Exchange Rate Breaks 7

On the evening of September 15, the offshore RMB exchange rate against the US dollar fell below the "7" level. More than two years later, the exchange rate of RMB against the US dollar has entered the "7" era. On September 16, the exchange rate of RMB against the US dollar also broke through the integer level of "7" in the onshore market, reaching the lowest level of 7.0188, a new low for more than two years.

"Break 7" needs no panic

Many industry experts pointed out that there is no need to pay too much attention to whether the RMB exchange rate "breaks 7", and "breaking 7" does not mean that the RMB will depreciate significantly. At present, the two-way fluctuation of RMB exchange rate is normal, and the rise and fall are normal. There are also institutional views that the moderate and orderly depreciation of the RMB exchange rate is conducive to boosting exports and playing the role of automatic stabilizer of the exchange rate in regulating macro-economy and balance of payments.

The "7" exchange rate has been regarded as an important barrier for many times. For example, in August 2019 and may 2020, the RMB exchange rate broke "7" due to trade friction and epidemic factors respectively.

In fact, after "breaking through 7" in August 2019, the RMB exchange rate has opened a flexible space that can be up and down. Now, both the government and the market have greatly enhanced their tolerance and adaptability to the two-way fluctuation and wide range fluctuation of the exchange rate. This can be confirmed by the recent market performance: the fall in the RMB exchange rate since August 15 has not been accompanied by market panic.

At present, China's foreign exchange settlement and sales market has been running smoothly. Since August, the bank's settlement and sales of foreign exchange and foreign-related payment have been in a double surplus situation. In August, the bank's foreign exchange settlement and sales surplus was US $25 billion, and the foreign-related income and expenditure surplus of enterprises, individuals and other non banking departments was $11.3 billion, all higher than the monthly average level since this year. Foreign investors as a whole net buyers of China's securities, foreign exchange market participants more rational participation, maintain the "high exchange settlement" trading mode, exchange rate expectations stable.

In the future, with the stabilization of domestic economy and the correction of US dollar index, RMB exchange rate will rise back to "6" range again.

Textile enterprises are hard to benefit

Some experts believe that the moderate depreciation of the RMB exchange rate is conducive to exports and will enhance the competitiveness of China's export products to a certain extent. However, as for the RMB exchange rate "breaking 7", some market views worry that it will have adverse effects in some aspects. For example, depreciation expectation may aggravate capital outflow; The depreciation of exchange rate leads to the increase of import cost of raw materials, intensifies the pressure of imported inflation, and squeezes the profits of downstream industries; Increasing the pressure of debt service; It restricts the domestic monetary policy and limits the policy space for stable growth.

Before that, when breaking through "7", according to media survey, textile export enterprises did not benefit from the depreciation of exchange rate. Due to the destruction of overseas industrial chain caused by overseas epidemic, although China's textile export increased this year, more finished products were exported, and the number of fabrics directly exported decreased. Therefore, the exchange rate dividend, textile export enterprises did not benefit. On the other hand, due to the depreciation of exchange rate, the price of imported raw materials will rise. Although polyester is mostly made in China, a large number of upstream raw materials, whether crude oil at the forefront or PX necessary for PTA production, still need to be imported in large quantities. The prices of these raw materials are rising due to the depreciation of exchange rate. Therefore, raw material prices rise, polyester prices also follow the rise, downstream textile enterprises costs also increased.