Following yesterday (September 15) offshore RMB against the US dollar’s exchange rate fell below 7, today (September 16) the onshore RMB exchange rate against the US dollar also fell below "7", while the previous round of RMB exchange rate against the US dollar broke 7 in August 2020. The difference is that the decline in the RMB against the US dollar this round does not mean that the RMB is depreciating in a comprehensive manner. In fact, the RMB against other non-US dollars is still in a state of appreciation. What impact does this situation have on foreign traders?
RMB exchange rate against the US dollar fell below 7, which does not mean that the RMB depreciates completely
At the end of October last year, when the offshore and onshore RMB exchange rates against the US dollar rose above the 6.4 mark, the author wrote an article to analyze the benefits brought by the appreciation of the RMB. At that time, some scholars predicted that by the end of 2022, the RMB would rise to 6.1 against the US dollar. But it was unexpected that in the second half of this year, the RMB exchange rate against the US dollar fell significantly, especially after a sharp decline on August 15, the offshore and onshore RMB exchange rates against the US dollar fell below 7 on September 16, 2022.
Figure 1 From June 21 to September 16, 2022, the exchange rate of the onshore RMB against the US dollar. Image source: Sina Finance
Figure 2 From June 21 to September 16, 2022, the exchange rate of the offshore RMB against the US dollar. Image source: Sina Finance
According to the latest data (Figure 1 and Figure 2), it can be seen that before mid-August, the exchange rate of the RMB against the US dollar fell relatively small. After mid-August to the last full month, the exchange rate of the onshore and offshore RMB against the US dollar fell all the way until yesterday's offshore RMB fell below 7, and immediately today's onshore RMB against the US dollar also fell below 7.
In response to the decline in the RMB exchange rate against the US dollar in this round, Liu Guoqiang, deputy governor of the Central Bank of China, interpreted at the briefing of the State Council Information Office on September 5 that it was mainly affected by the adjustment of the US monetary policy. Against the background of the appreciation of the US dollar, other reserve currencies in the basket of SDR ( Special Drawing Rights ) depreciated significantly against the US dollar. Compared with other non-US dollars currencies, the depreciation of the RMB is the smallest. Because in the SDR currency basket, the US dollar appreciates and the RMB also appreciates, but the appreciation of the US dollar is greater than the appreciation of the RMB. Therefore, the RMB has not depreciated in a comprehensive manner.
At present, the RMB against the euro/Japanese yen/GBP is more stable than the RMB against the US dollar. Even since mid-August, the RMB against the Japanese yen/GBP has seen an upward trend.
Figure 3: The exchange rate of RMB against the euro from June 21 to September 16, 2022 Image source: Sina Finance
Figure 4: The exchange rate of RMB against the Japanese yen from June 21 to September 16, 2022 Image source: Sina Finance
Figure 5: The exchange rate of RMB against the British pound from June 21 to September 16, 2022 Image source: Sina Finance
or above means that when people use the US dollar to settle imports, the import cost will increase, and when using the euro, pound, yen and other currencies, the import cost will even be reduced.
RMB exchange rate against the US dollar fell sharply, and several companies were happy and some were worried
For individuals, starting from mid-August this year, the RMB exchange rate against the US dollar fell sharply, and in a month, it fell below the 7 mark. For ordinary people working in the United States, students studying in the United States and other groups, the RMB in their hands has shrunk and their purchasing power has become weaker.
For import companies specializing in the United States, the purchasing power of RMB in their hands will be smaller, resulting in increased costs and corporate profits. In addition, the US government has recently intends to increase restrictions on China's export of chip products, and it can be said that the import chip manufacturers of the United States are "a slightest and rainy."
According to General Administration of Customs data, in the first half of this year, our country imported 279.7 billion integrated circuits, with a total value of 1.35 trillion yuan, an increase of 5.5% compared with the same period last year. The total import volume of chips in the first half of the year was 1.35 trillion yuan, accounting for about 15.6% of my country's total import value, 187.8 billion yuan higher than the amount of oil imports. The above data means that the demand for chips in our country's market is still very strong. Of course, the price of consumer chips has suffered a Waterloo this year, and some manufacturers focusing on spot trade complained, but there is still a lot of demand for automotive/industrial chips.
It is worth noting that although my country is a major importer of semiconductor chips, except for some of the chips consumed, most of the other ones are produced in Taiwan, South Korea, Japan and other places in China. The proportion of imported chips directly from the United States is not large. Therefore, the depreciation of the RMB against the US dollar will not have much direct impact on chip imports. However, because semiconductor is a global market. The appreciation of the currency of this superpower in the world may also lead to an increase in production costs in various countries/regions, causing chip suppliers to raise chip prices.
For companies that specialize in exporting to the United States, due to the depreciation of the RMB against the US dollar, American customers can use less US dollars to buy more goods produced in China, which may actively promote the purchasing strength of their American customers to a certain extent.
Since the RMB exchange rate against the pound/yen/euro has not seen a sharp drop like the US dollar, the RMB shrinks only targets migrant workers, international students, and import/export companies specifically targeting the US market.
Editor: Clover.li
