What signal does the RMB central parity rate drop significantly by more than 1,000 points?

The central bank lowered the central parity rate of RMB against the US dollar by 1,000 points. The central parity rate closed at 6.2097 the previous day and closed at 6.2298 today, the lowest since April 2013.

① There is objective depreciation pressure on the RMB: From a capital account perspective, under the U.S. dollar interest rate hike cycle, the interest rate gap between China and the United States narrows, and capital outflows impact the RMB exchange rate. In addition, driven by the Belt and Road capital export strategy, companies going global will also expand their capital and financial account deficits. From the perspective of trade items, trade rebalancing suppresses commodity exports, the service trade deficit expands, and the current account surplus tends to narrow.

② The RMB has subjective demands for depreciation: In the past year, the RMB exchange rate was not flexible enough, causing the RMB’s real effective exchange rate to rise continuously in line with the US dollar. During the same period, the Euro, Japanese Yen, and BRICS currencies all depreciated significantly by more than 10%, which put pressure on exports. Shanda has intensified the pressure to stabilize growth.

This poses a dilemma for decision-makers: it is necessary to loosen currency, lower interest rates, lower exchange rates, and maintain growth, while at the same time stabilizing currency, stabilizing exchange rates, and guarding against risks. In the past, it was inclined to the former. At present, it seems that it is gradually moving towards The former is tilted, and the next step may be to expand the exchange rate fluctuation range, increase the flexibility of the RMB, and actively release depreciation pressure.

③The idea of ??stabilizing growth has changed significantly: from currency to fiscal, from finance to entity, from lowering interest rates to lowering exchange rates, and from comprehensive to directional. This is good for growth, but will impact asset prices in the short term, including stocks, bonds and real estate.

Which industries are affected by the depreciation of the RMB?

According to industry insiders, in terms of industries, the export-oriented industries in the A-share market will undoubtedly benefit from the depreciation of the RMB, and among them, textiles and clothing, toys, shoes and hats, etc. will be the biggest beneficiaries. The textile and apparel industry is highly dependent on exports. On the one hand, the depreciation of the RMB will help companies reduce costs and improve product competitiveness. Companies will receive more orders. On the other hand, it will help export-oriented companies obtain exchange gains. The depreciation of the RMB means that the purchasing power of foreign currencies has increased, which will further stimulate consumption and be beneficial to the export of the toy industry. For example, it is good for Gaule shares, etc.

Compared with the leading position of my country's textile and clothing industry in the international market, the home appliance industry also occupies an important position in my country's foreign trade industries. Analysts believe that with the depreciation of the renminbi, many home appliance listed companies in the A-share market are also expected to see an increase in export volume. You can pay attention to Yilipu, Midea Group, etc.

In addition, some securities firms believe that under the background of RMB depreciation, industries such as steel, shipping, and chemicals will also reap certain benefits. For example, for the steel industry, after the RMB continues to depreciate, exports from machinery, home appliances and other industries will increase, which may increase demand in the domestic upstream steel market.

Who is affected?

In the context of large fluctuations in the RMB exchange rate, who may be affected if there is a significant depreciation?

Category 1: Investors

Analysts said that historically, the trend of RMB and A-shares has been highly correlated. Under the general trend of RMB appreciation, RMB depreciation may be accompanied by a decline in A shares.

The reasons why the two are related are:

On the one hand, the depreciation of the RMB has triggered a decline in the valuation of local currency assets, resulting in the weakening of financial, real estate and other related sectors, dragging down the overall market; on the other hand, On the other hand, once the expectation of RMB depreciation is formed, it will lead to the outflow of hot money, and the liquidity environment for A-shares will quickly tighten.

Some institutional reports pointed out that the sharp depreciation of the RMB may bring a greater financial burden to airline companies and some real estate companies with heavy overseas financing burdens, which will in turn affect the valuation of related stocks and even the sales price of real estate in some areas.

Coping strategies:

Some analysts pointed out that judging from the experience of 2012, the performance of defensive industries such as public utilities, telecommunications and medical care is not affected by macro uncertainty and currency fluctuations. .

Category 2: The assets of people who own real estate may shrink

There is a "coincidence": the 9 years in which the RMB has continued to appreciate are also the 9 years in which China's real estate prices have continued to rise.

In 2005, after the RMB started to appreciate, a clear signal emerged: long-term appreciation against the US dollar.

Theoretically, a large amount of U.S. dollars will enter China and be exchanged for RMB assets to avoid the relative depreciation of the U.S. dollar. After these dollars enter, they exist in the form of certain assets.

Most of them are buying real estate. One of the reasons for the surge in housing prices in the past few years is the appreciation of the RMB.

In this process of appreciation, the assets of people who own real estate appreciate rapidly. The expectation of real estate appreciation has stimulated more people's desire to buy a house.

If the RMB depreciates, some investors are worried that assets will be withdrawn from real estate, especially those funds that have poured into the country from overseas in the early days. They will flow out of China due to the depreciation of the RMB, or they may no longer dare to enter China easily. Market, various effects have contributed to the decline in domestic housing asset prices.

Coping strategy:

Some analysts say that for third- and fourth-tier cities, housing prices are more likely to fall, and it is not suitable to take action at the moment. It is better to The approach is to wait and see.

The third category: students studying abroad

For students studying in the United States, this means that the same RMB exchange for foreign exchange is much less than before.

Coping strategy:

Buy in batches to share the risk. Industry experts suggest that customers who plan to use foreign exchange in the short term can observe the exchange rate fluctuations for a few days and find a relatively low price to start with. Yes, the risk can be shared in batches. Especially for customers who plan to study abroad and have a relatively large amount of foreign exchange funds, they can first exchange foreign exchange for foreign currency financial management.

Category 4: Overseas Shopping

The overseas purchasing market is booming, and price is one of the key factors. Prices of goods purchased overseas are generally about 30% cheaper than those purchased at domestic counters, and some are even half cheaper. This is the reason why many overseas shoppers choose to go farther away.

However, if the RMB depreciates, many overseas shopping shoppers will feel "lost" because the prices of some overseas goods they purchase will rise.

Coping strategies:

Generally, overseas shopping is often divided into two settlement methods: foreign currency entry and RMB entry.

Foreign currency entry means that credit card consumption is settled in foreign currency, and the cardholder needs to repay in foreign currency; if there is no foreign currency in hand, he needs to use RMB to purchase foreign exchange to repay.

If the cardholder has enough foreign currency, direct repayment in foreign currency will not involve an increase in costs.

Category 5: People traveling abroad

It is more cost-effective to buy foreign exchange first. Financial planners remind that many people like to use credit cards to shop when traveling abroad. If the RMB is appreciating, defer repayment. On the contrary, you can pay back less money.

But if the RMB continues to depreciate, it is best to consider exchanging all cash before leaving the country.

Category Six: Large Export Enterprises

Theoretically, the depreciation of the RMB is indeed beneficial to exports, and some small export enterprises that settle foreign exchange immediately may benefit from this.

Foreign trade companies with large transaction volumes may find it difficult to feel the positive impact of this round of depreciation because they have locked the exchange rate with banks in advance.

Coping strategy:

Analysts said that in order to reduce the risks caused by exchange rate fluctuations, foreign trade companies need to use some foreign exchange derivatives, such as forward foreign exchange settlement and sales, and foreign exchange swaps. Use foreign exchange options to lock in exchange rate risks. In order to avoid risks, the strategy of import and export companies is very simple: import companies only need to postpone the purchase of foreign exchange as much as possible, because the US dollar will become cheaper and cheaper relative to the RMB.

Category 7: Companies that are long RMB

In recent years, as the RMB has steadily appreciated against the U.S. dollar, domestic companies have ensured stable export revenue by going long RMB. Borrow money to bet on RMB appreciation.

Although doing so magnifies the benefits brought by the appreciation of the RMB, it also intensifies the losses caused by the depreciation of the RMB.

As the RMB has fallen against the U.S. dollar this year, more and more investors who bet on RMB appreciation have suffered losses. Those companies and individuals that used the popular method of hedging RMB risk through "target callable forward contracts" suffered huge losses on their books.

Category 8: Speculators who invest in China

A large amount of foreign capital has been making money in China for a long time.

There is a joke: an American goes to China to eat and drink, and when he leaves, he converts the remaining money into U.S. dollars, which means he eats and drinks for free for a year.

If the RMB depreciates, offshore RMB long speculators will suffer heavy losses.

Extended reading

The alarm of the global crisis has sounded in the sky

Text/Chen Gong

Anbang Consulting (ANBOUND) is a long-term tracking research Economic situation think tanks, since the spring of this year, have been tracking information that is disturbingly pointing in the same direction. A global economic crisis may be forming, and in fact, the world financial community has no effective way to deal with it. , therefore, this global economic crisis is likely to be of unprecedented intensity, and the scope of its sweep and spread will be surprising. It is very likely to spread all over the world, and only a few countries, such as the United States, Canada and India, are likely to become global A country where capital is a safe haven.

2015 was a very disturbing year.

In China, due to two consecutive five-year plans, the pursuit of a strategy of promoting economic growth through urbanization, and the implementation of the “4 trillion” and macroeconomic stimulus plans, Chinese society has accumulated a large amount of capital. , first it significantly pushed up real estate prices, resulting in huge government debt, and also plunged the real industry into an unsustainable state of collapse; later, loan sharking was everywhere, with repeated prohibitions, and criminal cases emerged one after another; recently, a large amount of capital has been diverted to the stock market. It caused huge fluctuations in the stock market and attracted more diversified speculative capital to join in, making market issues turn into political issues.

In Western countries, European countries continue to be mired in debt. The Greek crisis is always on the brink and may leave the Euro system and return to the Dramak system at any time. The importance of the Greek issue lies in the fact that all non-German-speaking countries at the forefront of urbanization in Europe, especially Southern Europe, may follow in Greece's footsteps, causing a total collapse of the existing Euro system and condensing the euro into a German-speaking currency. That's the biggest danger. In order to avoid this danger, Europe had no choice but to do its best to rescue Greece, but this also made Europe trapped in it and unable to extricate itself. In fact, Greece has kidnapped Europe, and Europe has been unable to take care of itself and has completely lost its role as a stabilizer of the world economy.

Recently, a large number of African refugees from France have fled France through the Anglo-French Tunnel and rushed to the non-euro system Britain. This situation has even created political problems in the UK, and if we look at the problem from an economic perspective, the result is very clear - even the refugees now understand that the European ship is sinking and all they can do is flee.

Since this year, my six-month information tracking and related major financial research have shown that the 2008 Wall Street financial crisis is not actually over, it is just the next stage of the global economy. A tight red flare. Urbanization, once regarded as a development treasure by the World Bank and some international institutions, has brought inevitable risks that have been seriously ignored. The pursuit of urbanization speed by countries around the world has accumulated and created huge amounts of debt, and the 2008 Wall Street financial crisis It was clear that even Wall Street’s most imaginative financial innovation capabilities were unable to digest and solve this problem.

As a result, the currencies of emerging market countries have depreciated, or even depreciated heavily. The currency of Indonesia has devalued to its lowest point in 17 years. The currency of Brazil, a "good student" in South America, has depreciated by one-third in the past year. The World Cup has no effect at all. By July, Malaysia's currency had depreciated to a 16-year low, and Thailand's currency had depreciated to a five-year low. The original theory is that currency depreciation is beneficial to exports, but in fact the exports of emerging market countries have declined. According to data from the Dutch Bureau for Economic Policy Analysis (CPB), the global trade in goods momentum fell by 1.3% in May, the export momentum of emerging market countries was negative 2%, and the export momentum of developed countries was also a big zero. China's exports also "unexpectedly" lacked momentum.

The crisis phenomenon that followed was the plummeting price of bulk commodities. Needless to say, the plummeting price of gold, it was all "aunts" who were deceiving them. Wheat futures experienced their largest monthly decline in four years in July, and the price of LME copper futures was the lowest in six years. The decline in coal prices can no longer be described as a plunge. Even Japan's Sumitomo Corporation and Brazil's Vale, which have always been shrewd, are eager to transfer Australian coking coal mines at a price of 1 Australian dollar. The well-known Walter Energy Company declared bankruptcy in July, and another major company, Arch Cool, requested debt restructuring, which was flatly rejected by Bank of America.

Also, there are countless companies that have drastically restricted production and been delisted from the stock market. Even the stock prices of the two major U.S. oil giants, Exxon and Chevron, have fallen to their lowest point in recent years. As global oil prices have fallen from a high of $115 last year to around $47, layoffs in the global oil industry have According to unreliable statistics, the number has reached 70,000.

The originally calm and optimistic pool was now smashed into a huge boulder, causing waves instead of ripples.

Now, even Puerto Rico in South America is experiencing a serious debt crisis and has defaulted on its debt. This small country with debts of up to 72 billion US dollars is a territory of the United States. It originally counted on U.S. capital assistance, but it is reported that it has been rejected by the United States. In Malaysia, its major state-owned investment company has also faced a serious political crisis due to huge debts, while in Hong Kong, there has been a rare phenomenon of chain store owners quietly "running away".

Now, global asset prices have plummeted. You can't even find a safe asset that can be used as a hedging and hedging. The funds are in your hands but have no use. What does this mean? !

Many economists and investment bank analysts attribute these factors to the effect of the Federal Reserve’s interest rate hikes. I believe that the Fed's interest rate hike does have some impact, but the main factor is the inability to digest the debt crisis caused by unreasonable urbanization in various countries around the world. After analyzing the economic situation using historical tools, I believe that the current situation is very similar to the crisis of the 1870s. The Federal Reserve was still hesitant to raise interest rates in the previous stage. This may be because they were considering the responsibility of the US dollar. Once they realize that the world economic situation is irreversible, they will not hesitate to raise interest rates, and they will not raise interest rates just once. , the extent and pace of interest rate hikes may exceed everyone's expectations.

Problems that cannot be solved by the market will inevitably extend to affect government policies.

In the process of doing major financial research, I have called and warned many times this year that the global economic crisis is forming and developing, but the impact is minimal. This is understandable, because under the influence of China's urbanization and nominal capital scale, the Chinese economic community is full of optimism. Even the economics community, which has always been critical, does not believe that the world economy will move towards a serious austerity crisis. , officials and scholars are still obsessed with China's economic locomotive status. This is a very dangerous phenomenon and will lead to China's macroeconomic control policies being based on blind optimism.

Final analysis conclusion:

In fact, the entire Chinese society is not ready to live in "tight times" at all. This is the most worrying issue. What is somewhat gratifying is that unlike Greece, it is not impossible for China's economy to live in "tight conditions" for a few days. As we all know, the most luxurious ones are state-owned enterprises, and the one that cannot live a tight life is the government. As long as macro-control policies can manage these two aspects, China's economy will not have major problems. The key is to accurately predict and judge the general situation and big finance, to adopt the correct policy direction, and not to blindly believe in the reality of the "reform bull".

About the author: Chen Gong, founding partner of Anbang Consulting, chief researcher, and think tank scholar. As a well-known information analysis authority in China, Mr. Chen Gong’s main research directions are international geopolitical research and urban research. He is the earliest think tank scholar in China to study the New Silk Road, as well as the theory of land-power trade system and the "Chinese version of the Marshall Plan". The proposer of.