Guan Tao: What is the fundamental reason for the rise and fall of the RMB exchange rate this year? How to combine market and policy logic in exchange rate analysis? If the correct method is mastered, the issue of the RMB exchange rate is not so mysterious.
2022year3Since the beginning of the month, the RMB exchange rate has risen and fallen, experiencing4、5Month and8、9Two waves of rapid adjustment in the month, to9At the end of the month, it fell below the integer level and came to an end2020year6The appreciation of the RMB exchange rate since January. The author believes that he insists on combining market and policy logic, adhering to the concept of "logic is more important than conclusion", and "guessed" the beginning and end of the "story" of this round of RMB exchange rate appreciation. As early as2020year5In January, the author analyzed and pointed out in a report titled "Overcoming Water: Current Global Monetary Relaxation Situation, Impact, and Suggestions" that "as a good emerging market, China may experience a resurgence of capital inflows after market panic and credit tightening warnings are lifted. With the exchange rate being more determined by the market, it is likely that the RMB exchange rate will appreciate faster in the short term. Same year6At the beginning of the month, as the RMB exchange rate hit a 12-year low at the end of last month, another article pointed out that the fundamental benefits of good epidemic prevention and control, rapid economic recovery, and other factors in the second half of the year will gradually show their support for the RMB. Result, from2020year6Starting from the beginning of the month, it fluctuated and appreciated2022year3Touch high at the beginning of the month6.30than1The maximum cumulative increase in RMB in this round13%。 2021end of the year2022At the beginning of the year, we also reminded us not to be obsessed with the RMB exchange rate6We should be vigilant against the risk of a correction in the RMB exchange rate caused by market or policy correction.2022year4month16During his participation in the Tsinghua Wudaokou Global Financial Forum, he further stated that there are four scenarios for the impact of the Federal Reserve tightening on the RMB exchange rate/At present, China has smoothly passed the first stage, which is the reduction of bond purchases by the Federal Reserve, the convergence of interest rate differentials between China and the United States, the slowing down of foreign investment inflows, and the continued appreciation of the RMB, but the appreciation has slowed down. At the same time, the warning is that as the Federal Reserve further tightens, its spillover effects will enter a second stage, with the RMB exchange rate shifting to a two-way fluctuation with both ups and downs. As a result, under the comprehensive influence of internal and external factors, the exchange rate of the Chinese yuan has decreased2022year3Wipe out all gains from last year in mid month, starting from4Accelerate the adjustment from the end of the month. Specifically, the term 'logic is more important than conclusion' refers to combining the logic of the market and policy from the following four aspects: One is the logic of historical experience. Although it is impossible for a person to step into the same river twice, what has happened before is worth referencing and learning from. Thanks to immersion in Chinaforeign exchangeDecades of market research have allowed us to learn from history and monitor the trend of the RMB exchange rate. 2011year9When the European and American sovereign debt crisis broke out in June, and everyone believed that China would face greater foreign investment inflows and exchange rate appreciation pressure, we proposed that in history, the RMB has been a risk asset rather than a safe haven asset, making it difficult to survive global financial turmoil alone. result,2011year10For the first time in the month, the purchase and sale of RMB in the Hong Kong region ran out of foreign exchange quotas,12In January, the RMB exchange rate in the domestic interbank market fell below the limit for more than a week in a row. 2015year2In January, based on the lessons learned from the economic downturn within the Asian financial crisis and the appreciation of the US dollar outside, I warned at the annual meeting of the China Economic Forum of 50 that the Asian crisis may be getting closer to us. As a result, China experienced capital outflows six months later-Reserve decline-The high intensity impact of exchange rate depreciation. That year7In January, I once wrote an article titled 'Preventing Today's Stock Market from Becoming Tomorrow's Foreign Exchange Market' and issued another warning. Recently, we have repeatedly warned about the potential impact of further tightening by the Federal Reserve, mainly by drawing on2014Experience and lessons learned from the turning point of the foreign exchange situation in.2014In the first half of the year, all parties were still working hard to alleviate the pressure of RMB appreciation, and at the beginning of the year, the RMB rose to6.0Nearby,6At the end of the month, the balance of foreign exchange reserves reached a historic high, but in the second half of the year, domestic foreign exchange continued to be in short supply, and the RMB turned to be under pressure of partial depreciation at the end of the year. The second is the logic of relative prices. The exchange rate is a relative price relationship between two currencies. Therefore, when studying exchange rate issues, we cannot only look at what happens in the currency issuing country, but also at what happens overseas, especially in the United States. Based on this logical starting point, we 'guessed'2021The yuan did not rise as strong as expected in the year.2020end of the year2021At the beginning of the year, we repeatedly emphasized that,2020In the second half of this year, there were multiple positive factors supporting the strengthening of the RMB exchange rate, including good epidemic prevention and control, rapid economic recovery, large interest rate differentials between China and the United States, and weak US dollar trends2021There is a possibility of dynamic evolution every year, and it is a small probability that the RMB will rise above six. result,2021In, despite the strong US dollar and stronger Chinese yuan, the bilateral exchange rate of the Chinese yuan against the US dollar only increased2%Slightly stronger, the highest price within the year will also rise to6.35Near. It is worth mentioning that,2020In, the US dollar index first rose and then fell, and many people predicted that the US dollar would enter a medium to long-term depreciation channel. But I was already there2020year10In the month of the month, it was pointed out in an article that one should not underestimate the new exchange rate cycle. If the US dollar rebounds more than2016The high point of the year means that the US dollar is still at2011year4In the period of significant appreciation since January.2020end of the year2021At the beginning of the year, it was further pointed out that the improvement of market risk preference is bearish for the US dollar, but major economies are heavily devaluing. The timing and magnitude of the US dollar depreciation will depend on the speed of economic recovery in major economies after the epidemic, and the economic fundamentals of the United States were better than those of Europe and Japan before the outbreak of this epidemic. result,2021In, due to the United States leading the recovery among developed economies and strong expectations of monetary tightening, the US dollar index rose instead of falling; get into2022Since the beginning of the year, the US dollar index has continuously set new highs in the past two decades. The sharp rise of the US dollar is an important external incentive for the current round of RMB exchange rate correction. The third is the logic of mean regression. At any time, factors that affect the rise and fall of exchange rates exist simultaneously, but different factors play a dominant role in different periods, and their influence varies. There is no currency that only rises but does not fall, and there is no currency that only falls but does not rise. It must fall if it rises too much, rise if it falls too much, and fall quickly if it rises too quickly. Especially with the continuous expansion of China's financial openness, the RMB exchange rate is becoming more market-oriented, and it has become increasingly asset price oriented, in a state of multiple equilibria. The herd effect and excessive appreciation and depreciation of exchange rates deviating from fundamentals often occur in a procyclical manner.2014The RMB exchange rate accelerated its appreciation in, and the market generally expects the RMB to break through six and enter the Five Dynasties period, which is a typical exchange rate overshoot. It is precisely based on this logic that we have always reminded ourselves that when analyzing the trend of exchange rates, we must not first have a viewpoint before finding evidence, 'where to go'. Based on this logic, we are2020year6At the beginning of the month, I keenly noticed that the market had experienced an overshoot of excessive depreciation. Of course, we never claim to have predicted a turning point, but we firmly believe that the law may be late but not absent. This logic also applies to explaining the current adjustment of the RMB exchange rate. because2021The favorable factors for the Chinese yuan have only weakened, but2022year3Since the beginning of the month, the aforementioned positive trend has even turned into a cyclical bearish trend. Similarly, due to the increase in exchange rate elasticity, it helps to timely release market pressure and avoid expected accumulation. Currently, it is not advisable to simply extrapolate the future trend of the RMB exchange rate linearly. It is expected that with the implementation of a package of stable growth policies and follow-up policies, the domestic economy will strengthen its rebound momentum, which will help stabilize the RMB exchange rate. The fourth is the logic of policy rationality. since1994Since the exchange rate integration at the beginning of the year, the RMB has implemented a managed floating exchange rate system based on market supply and demand. Under this institutional framework, whether the RMB exchange rate is flexible or rigid falls within the scope of exchange rate policy operations. Various exchange rate options (including exchange rate system arrangements and exchange rate policy operations) have their own advantages and disadvantages. Therefore, the international consensus on the optimal exchange rate choice is that no exchange rate choice is suitable for all countries and all periods of a country. Managed floating exchange rates belong to the "intermediate solution" of exchange rate selection, while fixed and floating exchange rates belong to the "corner solution". When facing the pressure of foreign exchange supply and demand imbalance, the "intermediate solution" of exchange rates usually faces issues of market transparency (i.e. why exchange rates rise or fall) and policy credibility (i.e. what is exchange rate stability).2001In, President Yi Gang once wrote an article stating, "If there is a high level of credibility in managing floating stocks, the public will not panic; If credibility is low, They will follow up, Sell local currency assets first. At this point, the market exchange rate will 'overshoot' under the market mechanism. When the ammunition for government reverse operations (foreign exchange reserves) runs out, the intermediate exchange rate system collapses. Based on this policy logic,2016At the end of the year, I pointed out in an interview with the media that the core issue of the current "intermediate solution" of the RMB exchange rate is the credibility of the exchange rate policy. Stabilizing market confidence not only relies on communication between the government and the market, but also on government market operations2015After the domestic stock and foreign exchange market turmoil in, it is particularly important to reshape the government's market credibility. result,2017In, by introducing countercyclical factors to improve the middle price quotation mechanism, the Chinese yuan exchange rate not only did not break 7%, but also surged by nearly7%Since then, it has been implemented“8.11”The successful counterattack of the exchange reform. The author's recently published book "The Logic of Exchange Rates" (Chinese Translation Publishing House) mainly collects2020Year, especially2020Since the second half of this year2022year3At the end of the month, we will observe and reflect on the trend of the RMB exchange rate and exchange rate policy. This is a flexible application of the aforementioned exchange rate analysis logic, which is a prior analysis rather than a "hindsight". It has been proven that if the correct method is mastered, the issue of the RMB exchange rate is not as mysterious. |
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