Increased costs of enterprises with RMB rising and falling

 The yuan rose again, rising to 6.73 on September 17, a record high after April 2019.

Deviations from the present value of the exchange rate from depreciation expectations

CNMOULDING post that the renminbi depreciation expectations increased, as recently as the renminbi appreciation, here mold manufacturing economic enthusiasts try to explain as clearly as possible the difference between depreciation expectations and exchange rate present value.

1) depreciation expectations. 

The exchange rate depends on the relative strength between the two currencies, and the depreciation expectation is the possibility that the market thinks one currency will depreciate against another in the future. Interest rate parity relationship, if the market believes that a country's currency has depreciation expectations, then capital outflow arbitrage will promote its currency interest rate rise, until the arbitrage space disappears, interest rate rise can compensate for depreciation expectations. Therefore, depreciation expectations can be accurately measured by fluctuations in the spread between the two currencies. Although the current RMB exchange rate is basically flat with April 2019, the Sino-US spread has expanded from about 60 basis points at that time to the current 246.9 basis points. This is a significant increase in depreciation expectations data quantification.

2) the present value of the exchange rate.

 Exchange rate present value = depreciation expect other effects (spread, central ticket, consumption of external storage hard pull, regulation, etc). The present value of the exchange rate covers depreciation expectations but is different from depreciation expectations. The depreciation expectation does not necessarily depreciate, other effects can cover the depreciation expectation, the exchange rate will not depreciate but also appreciate, which is the reason for the current RMB appreciation.

 However, if the means of maintaining the exchange rate without depreciation are not sustainable, the depreciation expectation will be a grey rhinoceros risk, but the risk landing will be affected by the dual influence of control ability and market sentiment, and the mood will be changeable. is changeable.

Deviations from foreign exchange reserves and foreign exchange holdings

 For foreign exchange reserves and foreign exchange accounts, there are similar deviations.

 China's foreign exchange reserves rose $10.218 billion in August, according to dollar-denominated outgoing reserves.

But the central bank's foreign exchange share shows that in August, the foreign exchange share decreased by 3.825 billion RMB, and the foreign exchange account for 7 consecutive drops!

Generally speaking, changes in foreign exchange reserves = changes in the nominal value of foreign exchange assets.

 A decline in foreign exchange accounts for a real outflow of foreign exchange; the increase in foreign exchange reserves is a rise in nominal value in dollars (but in SDR, the nominal value of foreign exchange reserves is reduced).

 The 7 consecutive decline in foreign exchange is the performance of the continued flow of foreign exchange, is a further confirmation of depreciation expectations!

External promotion

After that, the yuan has appreciated 3.2 percent of the dollar, that is,3.2 % of the external appreciation; after that, the previous August CPI average 3.53 %, that is, the internal depreciation 3.53%.

And the U.S. CPI average of 1.2% in the previous August, it was clear that the dollar's purchasing power fell less than the renminbi.

In terms of purchasing power parity, more currencies with lower purchasing power have the potential to depreciate (which is why the renminbi is expected to depreciate), but in fact, the renminbi has risen by 3.2 percent.

For export enterprises, this year's rise and decline will increase the cost of enterprises by 6.73% macroscopically, and the survival rate of export enterprises will be greatly tested. For example, our injection mold manufacturers and plastic injection products supply companies use overseas markets to cook this deviation will suppress export earning capacity, resulting in this deviation trend can not be sustained.

How can foreign trade enterprises save themselves after the sharp appreciation of the RMB?

"I don't want to settle my foreign exchange! But fear of further appreciation ."

 Faced with a sharp appreciation of the yuan, hit a new high in more than a year, CNMOULDING precision mold companies quite contradictory.

 Since the usual orders are settled 90 days after shipment, and the exchange rate between the dollar and the renminbi at the time of the order is still about 7.1, it now fluctuates to about 6.8, with a direct loss of 4%," net profit was suddenly appreciated to rise ".

 Under the impact of anti-globalization and global epidemic, the already complex foreign trade situation is becoming more and more severe. The recent sudden appreciation of the RMB has made its foreign trade business worse.

 Although exchange rate fluctuations are a familiar risk for foreign trade companies, under heavy pressure, falling straw also becomes heavy.

 Loss of net profit and difficulty in raising prices

For foreign trade products such as plastic injection molding products, the appreciation of the RMB by 4% is a direct net profit from most orders.

 Foreign trade orders for plastic products are in June ~ August, while foreign exchange settlement peak is after September. This also means that when large-scale orders were placed, the yuan was about 7.1 against the dollar, and by the time the foreign exchange settlement was directly more than 6.8, the magnitude of the loss could be imagined for commodities such as plastic products.

 In order to cushion the exchange rate risk, the company will usually take some export products to lock foreign exchange measures," this sudden appreciation of the renminbi is somewhat unexpected, appreciation speed is also relatively fast, many have not had time to lock foreign exchange ."

 Lock foreign exchange refers to forwarding settlement and sale of foreign exchange business, that is, determine the exchange price before, the actual foreign exchange income and expenditure occurred after. In order to reduce the impact of exchange rate fluctuations, some foreign trade companies will adopt the method of locking the exchange rate in advance to reduce the risk of two-way fluctuations.

 However, the lock itself also has the risk, in the future exchange rate trend is relatively clear and stable, the company can lock the exchange rate in advance to reduce the loss caused by the exchange rate rise or fall. But if the judgment is not accurate, the lock will affect the profit instead.

 A few years ago, the trend of the renminbi suddenly changed from appreciation to a sharp depreciation, we were caught unprepared, but also let them hold an emergency meeting, immediately stopped the lock-in operation.

Search in danger

 Compared with the export of traditional industries such as clothing and textile, the export of products such as bicycles and laptops in the epidemic situation has risen against the trend and even ushered in a blowout, which has given them some initiative.

 Yiwu Longda vehicle business operator Wu Yaping told the first financial reporter, this year is the best year in 20 years of business, and the past New year and Christmas before and after the peak season, this year since May has been the export season. The market in short supply allows them to choose ways to facilitate their transactions, such as all orders are settled in renminbi.

 "Because of the uncertainty of the overseas epidemic, we are worried about the impact on the settlement of foreign exchange, so we all set up a settlement in RMB, and don't worry about exchange rate fluctuations ." Wu Yaping told reporters that some customers want to do a letter of credit, was also rejected. According to her estimate, exports this year are at least three times those of last year.

 As an early exporter of electric bicycles, Suzhou Mengshi Intelligent Vehicle Technology Co., Ltd. increased its exports by 2.5 times in the second quarter. For them, the fastest-growing overseas market in the United States, followed by the European region.

 Although the industry is growing against the trend, factors such as the epidemic and the US election still have a greater impact on the company's overseas services, and the future situation is difficult to judge, Zeng said. In order to cushion the impact of trade friction, they have laid out overseas assembly plants and plan to base themselves on online sales to lock in more young people.

 On the impact of RMB appreciation, in the foreign trade industry for more than 20 years Meng Zhuo also looked far away.

 Meng believes that keeping the renminbi high makes foreign exports more difficult, but it will also have other effects, such as expanding the renminbi's share of the world currency, preventing Chinese capital outflows, and increasing imports to reduce surpluses with countries such as the United States. These benefits may well outweigh the temporary loss of exports.

 The so-called crisis has always been in danger. The rise in the RMB exchange rate is not conducive to exports but to imports. Under the background of the domestic and international double cycle, improving the added value of products, trying to increase for enterprises to improve the added value of products, try to increase imports and open up domestic markets.