Do you remember that at the beginning of 2020, when the new crown epidemic broke out, the global economy fell into chaos, and the RMB exchange rate fell to 72. China's assets have suffered heavy lossesAt that time, many people were pessimistic about the prospects of China's economy, and some even predicted that China would face economic collapse. However, as it turned out, they couldn't have been more wrong.
After more than a year of hard work, China has successfully controlled the epidemic, restored economic growth, and demonstrated strong resilience and vitality. And in the last month of 2023, China's economy ushered in a feast of surprises - the appreciation of the renminbi and the soaring of Chinese assetsWhat the hell is going on?Why is the renminbi appreciating?
China is the only major economy in the world to achieve positive growth, with gross domestic product (GDP) growing by 8. year-on-year in the first three quarters of 20231%, higher than expected. The stability and growth of China's economy has enhanced the confidence of the international market in China and attracted a large inflow of foreign capital. According to statistics, in the first 10 months of 2023, China's actual utilization of foreign investment increased by 14% year-on-year9%, up to 11 trillion yuan. The inflow of foreign capital has increased the demand for the renminbi and promoted the appreciation of the renminbi.
The United States is the world's largest economy, and the U.S. dollar is the world's most important reserve currency. The U.S. economy and monetary policy have a significant impact on the global exchange rate market. In 2023, the U.S. economy will continue to be hit by the new crown epidemic, with high unemployment, soaring inflation, and slowing economic growth.
In order to stimulate the economy, the Federal Reserve adopted an ultra-loose monetary policy and printed a lot of money, resulting in a surplus of dollars and a depreciation of the dollar. The depreciation of the US dollar has led to a relative appreciation of other currencies, and many currencies, including the renminbi, have strengthened against the US dollar.
In recent years, China has actively promoted the internationalization of the renminbi, expanded the use of the renminbi in international investment and investment, and increased the influence of the renminbi in the international financial market. The renminbi has become the world's fifth-largest payment currency, the third-largest financing currency, and the sixth-largest foreign exchange reserve currency.
With the deepening of the internationalization of RMB, more and more countries and institutions have begun to hold and use RMB, increasing the demand for RMB assets. Especially in the context of rising global inflationary pressures, RMB assets have high safety and yield, becoming an ideal choice for investors.
The appreciation of the renminbi has not only directly affected the exchange rate market, but also indirectly affected other asset markets, especially China's asset market. The appreciation of the renminbi has brought about a series of positive feedback effects, driving the soaring of Chinese assets. Specifically, there are the following aspects:
The appreciation of the renminbi means that the cost of exchanging the renminbi for foreign exchange is reduced, and the cost of imported goods and services is reduced. This is good news for companies that need to import large quantities of raw materials and intermediate goods. They can buy more imported goods and services with less RMB, reducing production costs and increasing profit margins. The profitability and market competitiveness of these companies will be improved, which will drive their stock prices**.
The appreciation of the renminbi also means that the cost of exchanging foreign exchange for renminbi will increase, and the export of goods and services will increase. This is a challenge for those export-oriented enterprises. They need to improve their product quality and innovation capabilities to cope with the competitive pressures of foreign markets. However, it is also an opportunity.
Because the appreciation of the renminbi reflects the strength and stability of China's economy, as well as the brand effect and credibility of China's goods and services. All these factors will increase the recognition and trust of foreign consumers in Chinese goods and services, thereby increasing the competitiveness and market share of China's exports. These companies will increase their sales revenue and market position, which will drive their stock prices**.
The appreciation of the renminbi and the surge in Chinese assets are a bright spot for China's economy in 2023, but also a major challenge. They reflect the strength and resilience of China's economy, but also expose the imbalance and inadequacy of China's economy.
They bring us opportunities and benefits, but also pressures and risks. We should take a correct view and deal with this phenomenon, not only seize the opportunities and give full play to our advantages, but also guard against risks, defuse challenges, achieve the basic stability of the RMB exchange rate, maintain the healthy development of China's assets, and provide strong support for the high-quality development of China's economy. The renminbi exchange rate has risen again