Beijing time:2022-08-24 05:06
[NTD, Beijing, August 24, 2022]China’s economy is weak, and the exchange rate of the yuan against the US dollar is close to 6.9, falling to its lowest level in two years. Experts predict that the renminbi’s decline has not bottomed out and may depreciate further.
According to FactSet data, on August 23, the exchange rate of the yuan against the U.S. dollar in the onshore market fell to 6.86 yuan, and the exchange rate of the yuan fell to its lowest level since August 2020.
In the offshore market, the RMB against the US dollar fell below 6.88 yuan, and the RMB exchange rate fell by more than 8% during the year.
The yuan has depreciated rapidly against the U.S. dollar since the People’s Bank of China lowered the MLF (Medium-Term Lending Facility) interest rate. After the LPR (loan market quoted interest rate) was lowered on the 22nd, the RMB further depreciated.
China’s economic woes have exacerbated the yuan’s slide. In July, the CCP’s official economic data released, China’s industrial production slowed down from 3.9% in June to 3.8%; the service industry fell to 0.6% from 1.3% in June; the retail industry slowed to 3.1% in June 2.7%.
In addition, fixed asset investment, inflation, and youth unemployment deteriorated more than expected, pointing to a weaker overall Chinese economy.
On August 23, a foreign exchange trader from a major state-owned bank told China Business News that the devaluation of the renminbi is mainly due to the impact of interest rate cuts and social financing and other economic data.
Wu Zhaoyin, director of macro strategy of AVIC Trust, previously said that the upward trend of the US dollar is still not over, and there is still downward pressure on the RMB exchange rate.
The Wall Street Journal reported that the yuan could weaken further. The central bank’s rate cut signals that Beijing will not keep pace with other central banks’ rate hikes, so the yuan may weaken further, driven by interest rate differentials.
Financial institutions are also not optimistic about the renminbi. HSBC forecasts the yuan to fall to 6.9 against the dollar by the end of 2022 and 6.95 by mid-2023.
According to HSBC, the exchange rate of the RMB against the US dollar has recently broken through the closely watched 6.8 mark, and by the end of this year and the first half of next year, the RMB exchange rate may be between 6.75 and 7.00.
Hua Ri believes that the current state of China’s economy is the result of the CCP’s high-level policies. Unpredictable and widespread lockdowns continue to sweep across the country under the Dynamic Zero Policy, causing fluctuations in consumer confidence and production activity. In addition, a deep downturn in the housing market could prompt further depreciation of the renminbi.
(Comprehensive report by reporter Luo Tingting/responsible editor: Wen Hui)
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