What Are Exchange Rates?

The exchange rate of RMB against foreign currencies represents the external value of RMB. It is formulated and adjusted by the State Administration of Foreign Exchange on the basis of the principle of independence, unity, and reference to domestic and international price comparison levels and the fluctuation of exchange rates in international financial markets. As the exchange rate for all foreign exchange receipts and payments settlement, it is the official exchange rate, there is no market exchange rate, and its price method adopts the international direct price method, that is, a fixed amount (such as 100, 10,000, 100,000, etc.) of foreign currency equivalent to a certain amount Is used to represent the exchange rate of RMB to foreign currencies. The size of the foreign currency of a fixed unit depends on the value of each foreign currency. Except for the exchange rate of RMB to Belgian Franc and Italian Lira using 10,000 (10,000) units and the exchange rate of JPY to 100,000 (100,000) units, For all other foreign currency exchange rates, one hundred (100) units are used as the conversion standard. ^[1]

RMB exchange rate

RMB

You want to know the yuan against the dollar

At 19:00 on July 21, 2005, an exciting time for China's exchange rate

China's central bank since 2005

Economist Song Qinghui: RMB exchange rate plummets, there are big opportunities

At the end of January 2015, the exchange rate of the RMB against the US dollar rarely fell sharply, marking the largest one-day drop since March 2014. There are many reasons for the plunge of the RMB exchange rate, mainly due to multiple factors including the delinking of the Swiss franc from the euro, quantitative easing in the euro area, and the Greek election situation to accelerate the flow of funds into traditional safe-haven currencies, which has caused fluctuations in currency exchange rates in emerging markets. The current downside risk of the renminbi is controllable, but this shock and decline situation is a rare historical opportunity for exporting enterprises. ^[18]

On January 29, the spot exchange rate of RMB against the US dollar closed at 6.2469, compared with the 6.1335 median price drop of 1.85%, and the lowest quotation of 6.2542 during the session was as high as 1.97% (data source: WIND Information), nearly 2% The daily limit level. This is already the third day of the renminbi exchange rate approaching the daily limit after Monday and Wednesday.

Regarding the RMB exchange rate, at the press conference of the State Council Office held on January 23, Deputy Governor Pan Gongsheng of the Central Bank [Weibo] said that the European Central Bank s new QE policy and the normalization of the US quantitative easing policy will further promote the dollar The stronger exchange rate may put downward pressure on the RMB against the US dollar. ^[19]

Song Qinghui: The largest depreciation in 2015 is 4% ~ 5%

Economist Song Qinghui believes that there are many reasons for the renminbi's plunge, mainly due to multiple factors such as the delinking of the Swiss franc from the euro, quantitative easing in the euro area, and the Greek election situation to accelerate the flow of funds into traditional safe-haven currencies, which has triggered fluctuations in emerging market currency exchange rates .

Regarding the future trend of the RMB, the market believes that the possibility of continued depreciation in the future is relatively large, but the scope may be limited.

Song Qinghui pointed out that the quantitative easing policy of the European Central Bank and the trend of normalization of quantitative easing policy in the United States may put some downward pressure on the exchange rate of RMB against the US dollar. However, due to the implementation of a managed floating exchange rate system for the renminbi, the depreciation rate will not be too large, and the renminbi exchange rate will not trend downward in the future. The maximum depreciation rate of the renminbi exchange rate in 2015 will be at most 4% to 5%. ^[20]

Li Keqiang: There is no basis for continued depreciation of the current RMB exchange rate

Li Keqiang believes that the recent improvement of the renminbi exchange rate quotation mechanism is a reasonable measure to conform to the trend of international financial markets, and it also involves adjustment in reform. The current RMB exchange rate does not have a basis for continued depreciation and can remain basically stable at a reasonable and balanced level. ^{[twenty one]}

On March 29, 2019, during the Boao Forum for Asia 2019 annual meeting, Zhou Xiaochuan, the vice chairman of the Boao Forum for Asia and the former governor of the People's Bank of China, stated that the RMB exchange rate mechanism is more market-oriented and more in line with internationally recognized methods. The fluctuation will also be larger, which will more effectively reflect the market's supply and demand relationship, and China will continue to move forward in this direction. Zhou Xiaochuan also said that a flexible floating exchange rate will help the economy achieve a better balance, it will help the allocation of market resources, and it will help the international business community to recognize it. "China, as an important part of the global economy, the world's largest trading country and an important investment country, we will better play its role in the global and regional economies in the" Belt and Road "in the future. Exchange rate mechanisms require We keep moving in this direction. " ^[22]