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What impact does the RMB exchange rate break “7” have on foreign trade?
Source: Chinese News Network
What does the “break 7” RMB exchange rate mean? What impact will it have on corporate exports?
The head of the central bank said in response to the “break 7” of the RMB: the exchange rate of the RMB “break 7”, this “7” is not the age, it will not return to the past, nor is it a dam once broken through by the flood, it will be a thousand miles away; “7” is more like the water level of a basin, which is highest during the rainy season, and then lowers again during the drought season, with ups and downs.
“Such a small periodic short-term depreciation is normal and the RMB exchange rate fluctuates in both directions.” Dong Dengxin, director of the Institute of Finance and Securities at Wuhan University of Science and Technology, told reporters that the RMB exchange rate fluctuates substantially from around 6 to 7, and “breaking 7” is still Within a reasonable range, the RMB exchange rate is still stable.
Dong Dengxin said, “A moderate depreciation of the RMB will help stimulate the export of domestic products. After expanding exports, it will also stimulate economic growth.”
Sinolink Securities also said that the devaluation of the RMB will further enhance the price competitiveness of some industries with a high proportion of exports. Foreign exchange earnings from export activities are also expected to benefit from foreign exchange gains, while the depreciation of the RMB could further boost the profits of export-oriented companies.
However, Bai Ming, deputy director of the International Market Research Institute of the Ministry of Commerce Research Institute, believes that the devaluation of the RMB exchange rate is also a double-edged sword. Exporting companies rely on the depreciation of the RMB exchange rate to increase their income, but if they use too many imported raw materials and components, they will also increase their expenses due to the depreciation of the RMB exchange rate.
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