**Surpluses usually lead to increased pressure on the renminbi to appreciate. Here's why:
1.Changes in foreign exchange supply and demand: **A surplus means that a country's exports are greater than its imports, and foreign exchange earnings exceed expenditures, resulting in an increase in foreign exchange reserves. In the foreign exchange market, the demand for RMB will increase accordingly because foreign countries need to convert foreign currency into ** RMB to purchase domestic goods. With the increase in demand, under the effect of the market mechanism, if the monetary authorities do not intervene, the renminbi may face upward pressure due to the shortage of supply.
2.Capital inflows: When the international market perceives China's economy as strong and optimistic, foreign investors may invest more in Chinese assets such as ** and bonds, which also increases the demand for the renminbi in the foreign exchange market and further promotes the appreciation of the renminbi.
3.Market expectations: A sustained surplus may lead to the expectation that the market will continue to appreciate the currency, attracting more international capital inflows, thus reinforcing this trend.
However, it is worth noting that a long-term and excessive surplus may also lead to an increase in internal inflationary pressures, and at the same time, in order to maintain exchange rate stability and balanced economic development, the amount of RMB in the market may be adjusted through monetary policy or other means to offset some of the appreciation pressure, at which point there may be a certain degree of internal depreciation effect (i.e., a decrease in the purchasing power of money relative to domestic goods and services). But in general, from the perspective of external value, the impact of the surplus on the RMB is more inclined to appreciation.