Why is the China RMB suddenly falling sharply

What happened? The rapid devaluation of the RMB

Yesterday, the exchange rate market appeared obvious fluctuations, offshore yuan trading time fell below 7.15,7.16,7.17 points, the evening decline further expanded,7.18 and 7.19 were also broken, the highest depreciation within the day of 500 basis points. 7.19 This position, basically the lowest in recent years, before the appreciation of the yuan from 8 to 6, and then from 6 now devalued to 7.19, the yuan has been a roller coaster ride in the past decade.

 So why is the rapid depreciation of the RMB?

First of all, we do not set growth targets this year, which has an impact on confidence in international capital, and it is normal for the economy to depreciate its bad exchange rate.

 Second, the growing voice of external disharmony, which makes imports and exports also increased obvious uncertainty, the continued surplus is conducive to currency stability, if the basis of the surplus does not exist, then the value of the currency will also fluctuate.

 Third, the issuance of special treasury bonds, government debt will certainly rise sharply this year, coupled with the central bank's continued easing, and the possibility of a cut in interest rates in the future will reduce the value of the local currency.

 Fourth, strong U.S. stock markets, a restart of the economy, and persistent deflationary pressures have not eased, leaving capital still in demand for safe havens, so the reverse flow of global capital is not conducive to the stability of the renminbi.

 Fifth, we may also subjectively intend to let him depreciate, depreciation will be more conducive to exports. which is beneficial for us to digest domestic stock. Stable economy.

 So, all countries are playing games now, and the exchange rate is an important game, but Lao Qi believes that the RMB is a little undervalued now, because although we are loose, but the speed of printing money, obviously still can not compare with the United States, so there may be a lot of uncertainty in the short term, but in the medium and long term, at least the RMB against the dollar is undervalued. Nor can we let the yuan depreciate forever. Because a continued devaluation would do so much harm.

 First, the continued depreciation of the renminbi will accelerate the withdrawal of foreign capital and drain foreign exchange reserves. Foreign exchange is the central bank's assets, foreign exchange decline, the central bank's balance sheet is bound to shrink. will also affect domestic monetary policy.

 Secondly, depreciation is not conducive to asset prices, we have said before, the rapid depreciation of the RMB process must be the stock market down, indicating that funds are going out, market funds are reduced, will certainly fall. The same is true of the bond market, capital decline must be interest rates rise, prices fall, so the market bond market pain is inevitable. Moreover, higher interest rates are not conducive to economic recovery. The outflow will also put pressure on the housing market.

Third, the depreciation is too large, the status of RMB internationalization will have a huge impact, you are now a reserve currency, can not easily fluctuate so much. Otherwise, people lose faith in you, they don't need you.

 Fourth, although it is good for exports, it is not good for imports, and depreciation means that we will purchase raw materials more expensive. And many of our manufacturing are processing materials, the beginning to go to inventory when very cool, but wait until to fill the inventory, found carrying side sink.

 Fifth, the depreciation of the RMB is also greatly unfavorable to the wealth of the people and studying abroad, traveling, and purchasing overseas will all be affected.

 Exchange rate issue is very sensitive to each of our foreign trade plastic injection companies, share to you, hope to help you.