2020 is an extremely magical year for all foreign traders. Bank accounts have been closed, raw material costs have soared, old customers continue to lose, new customers have disappeared from placing orders, containers are missing, and freight prices have fallen flat. Fei, a box is hard to find! What causes headaches for foreign trade people is not only skyrocketing shipping costs, but also exchange rate losses caused by the continued appreciation of the RMB.
01
On January 4, the onshore RMB exchange rate against the US dollar rose above the 6.5 mark. It has risen to the 6.4 era. Currently, the offshore RMB exchange rate against the U.S. dollar is also at 6.4. On January 4, the central parity rate of the RMB exchange rate in the inter-bank foreign exchange market was: 1 US dollar to RMB 6.5408.
The last 6.5 era dates back to May 2018, and this time it directly enters the 6.4 era.
The group is also in a state of shock! Friends are all discussing this “bad news”!
According to data, at the end of May last year, the central parity rate of the US dollar against the RMB was reported at 7.1316, falling below Lowest since March 2008.
Since then, the RMB has started to rise and rise. In 7 months, the appreciation rate has been as high as about 8.5%. Such an appreciation rate is really rare.
In the past seven months, the sharp appreciation of the RMB has far exceeded expectations, which is not good news.
02
Some people may think that the appreciation of the RMB is a good thing, but in fact this is the theory of relativity. It may be a good thing for companies engaged in importing, but it is a huge bad thing for companies engaged in exporting.
Foreign trade companies generally use US dollars for accounting and RMB settlement. For export companies, when the RMB appreciates, the exchange rate drops from 7 to 6.4, and foreign trade The company’s settlement of 100,000 US dollars was originally exchangeable for 700,000 RMB, but now it can only be exchanged for 640,000 RMB, resulting in a direct loss of up to 60,000 RMB!
Therefore, if the previous quotations did not pay attention to the exchange rate trend and take corresponding protective measures, even if the sales volume of the foreign trade company is very good, it will be difficult to make up for the losses caused by exchange, or even directly turn into losses.
Although the situation of foreign trade companies is good in the second half of 2020, many companies have very low profits due to various factors, such as shipping costs that have been rising, exchange rates that have been falling, and exchange rates that have been rising. Material costs, etc.
The RMB has appreciated sharply and the exchange rate has plummeted. Many foreign trade companies have lost money and even dare not accept orders!
The main reasons for the sharp appreciation of the RMB relative to the US dollar:
1. China has achieved remarkable results in fighting the epidemic, its economic recovery speed is also leading the world, and the RMB exchange rate is supported by strong fundamentals. Previously, the communique of the Fifth Plenary Session of the 19th CPC Central Committee also mentioned that China’s GDP in 2020 is expected to exceed 100 trillion yuan. However, the epidemic situation in the United States remains severe, with the cumulative number of confirmed cases exceeding 15 million.
2. The United States continues to release water to stimulate the economy, and the US dollar index weakens. Last week, Federal Reserve Chairman Evans said he expected interest rates to remain at zero for a longer period of time. Recently, Biden and his designated new Treasury Secretary Yellen have repeatedly stated that stimulus policies should be stepped up. Biden also mentioned the “spreading money” plan. He said, “If the relief bill includes a $1,200 aid It will be better.”
3. On November 15, the ten ASEAN countries and 15 countries including China, Japan, South Korea, Australia, and New Zealand formally signed RCEP, and the world’s largest free trade agreement was officially reached. This will attract various countries to invest in China and increase their demand for RMB.
4. Global capital is actively allocating to China. Well-known institutions such as Goldman Sachs and Bridgewater Associates have recently expressed their optimism about Chinese assets. Luo Ruohong, deputy general manager of China Re Asset Management Co., Ltd., pointed out in a recent speech that China’s bond market has become a must-have for global asset allocation. Cao Yuanyuan, technical director of the Research and Development Department of Oriental Jincheng, told the Financial Times that the widening interest rate differential between China and the United States has once again attracted global capital to increase the allocation of RMB assets, which is the main reason for the recent continued appreciation trend of the RMB.
5. The degree of marketization of the RMB exchange rate is gradually deepening. The recently released “China’s Monetary Policy Implementation Report for the Third Quarter of 2020” pointed out that the current characteristics of the RMB exchange rate formation mechanism are: first, the People’s Bank of China has withdrawn from normalized intervention, and the RMB exchange rate is mainly determined by the market; second, the RMB exchange rate floats in both directions; third, the RMB exchange rate The exchange rate formation mechanism has withstood the test of multiple rounds of shocks, the exchange rate flexibility has increased, and it has better played its role as an automatic stabilizer of macroeconomics and the balance of payments; fourth, socialThe market is expected to be stable and the foreign exchange market operates in an orderly manner; fifth, the market-oriented RMB exchange rate promotes the balance between internal equilibrium and external equilibrium.
03
China’s economic fundamentals and anti-epidemic performance are stronger than those of the United States, which is one of the fundamental reasons for the appreciation of the RMB exchange rate.
Recently, according to the “Guardian” news, 2020 may become the deadliest year in the history of the United States, because after the new crown epidemic spread wildly in the United States, among more than 3,100 counties, a total of More than half of the counties will have more deaths than births for the first time in U.S. history, and life expectancy in the U.S. could drop by three years.
Because the epidemic is so severe, the medical resources of major hospitals in the United States have been overwhelmed and may collapse at any time. Faced with this terrible situation, American doctors are also very pessimistic, and even lamented that the “darkest moment” in the United States has now arrived.
The 3-day epidemic data on the website of the U.S. Centers for Disease Control and Prevention shows that the cumulative number of confirmed cases of COVID-19 in the United States exceeds 20.346 million, with more than 284,000 new cases in a single day; the cumulative number of deaths is close to 350,000, and the number of new cases in a single day exceeds 20.346 million. 2,300 cases.
The reasons are nothing more than:
1. During the Christmas and New Year holidays, a large number of Americans still ignore the recommendations of health experts and travel and gather during the holidays;
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2. The epidemic rebounded in winter and virus mutations with stronger transmissibility appeared;
3. Not only human-to-human transmission, but also multiple channels of infection from the environment and objects (such as imports in our country) Environmental samples such as cold chain food and imported auto parts test “positive”).
4. Large-scale political mass demonstrations and rallies. Since the voting for the U.S. presidential election ended in early November 2020, demonstrators supporting Trump and Biden have organized several large-scale rallies and demonstrations in Washington, the capital. And judging from the situation at the rally, the proportion of people wearing masks is not high.
04
As for the trend of the RMB exchange rate in 2021, some foreign investors predict that the RMB exchange rate will exceed 6.4, 6.3 or even 6.2 in 2021. This may be a bit extreme, but overall, appreciation to 6.4 or 6.45 is already the limit.
Among them, Sino-US relations are a key influencing factor. Trump’s extreme bias has led to an increase in negative factors in Sino-US relations. But after Biden takes office, it is not expected that there will be many changes, because the U.S. strategy against China has been determined.
The RMB is expected to continue its appreciation trend since the second half of 2020 in 2021, but the magnitude and pace will be slower than in 2020.
The main reasons are:
1. The interest rate differential between China and foreign countries will still remain at a high level next year. Foreign central banks such as the Federal Reserve will maintain zero interest rates and continue to purchase assets, while China’s monetary policy will continue to return to normality next year.
2. China’s economic fundamentals can maintain its advantage next year. The rate of return of China’s real economy is still more attractive than that of European and American countries. In addition, China is accelerating the opening up of its real economy and capital market, so it can still continue to attract continuous inflows of foreign capital, supporting the trend of RMB appreciation.
However, by the second half of the year, the economic recovery in Europe and the United States will be nearly completed, fundamental factors will weaken, and the RMB exchange rate may fall from its high point.
3. The trade situation supports the appreciation of the RMB. In the first half of 2021, even if vaccination is gradually popularized, the recovery of supply capacity in Europe and the United States may be slower than expected. Therefore, at least in the first half of the year, China’s current account surplus is still expected, which will support the appreciation of the renminbi.
05
Currently, 49 of the 50 states in the United States have become the hardest-hit areas by the epidemic, and the epidemic in the United States has reached a “huge” level. Disaster” level. According to the current situation, there is almost no hope for economic recovery in the U.S. dollar market and appreciation of the U.S. dollar!
Editor’s reminder
A friend asked, if the exchange rate has fallen so badly, will it rebound in the future?
Recovery is actually only a matter of time, but judging from the current epidemic situation in the United States, don’t expect it in the short term. Since the United States has been severely affected by the epidemic, production has not yet fully recovered, and the rigid consumption of residents has led to an increase in net imports from the United States. The twin U.S. trade and capital flow deficits will continue in the fourth quarter, so the U.S. dollar will most likely weaken. On the contrary, the appreciation of the RMB is the general trend.
So, friends who deliberately transfer a large amount of money, or friends who have long-term balance of orders and are unable to settle the money in time, should really think twice, otherwise losses will come in minutes! </p
