Since entering 2014, many emerging economies have suffered a sharp decline in currency depreciation and stock market decline. Some people worry that the renminbi will follow its footsteps into the depreciation channel. In this regard, experts believe that China's economy is stable, trade and balance of payments have a large surplus, and foreign exchange reserves are sufficient, so there will be no large-scale capital flight and large currency depreciation like other emerging market countries. On the contrary, because the current account surplus can make up for the deficit in the capital account, the RMB will still face the pressure of appreciation in the future, but the increase will narrow, and the two-way fluctuation will rise and fall will become the new normal.
Capital flight to emerging markets
At the end of last year, the Federal Reserve officially launched the quantitative easing (QE) exit plan, and a large number of international funds began to withdraw from emerging markets. These countries, which rely heavily on capital inflows to develop their economies, experienced a sharp fall in their currencies and affected the European and American stock markets.
In late January, the Turkish lira exchange rate fell to a record low; the Argentine peso against the US dollar fell by a single high in 12 years; the Russian ruble, South African Rand exchange rate also fell. On January 24, European and American stock markets fell sharply. The S&P 500 index fell 2%, and the Dow Jones Industrial Average fell 1.96%. In particular, the stocks of companies close to emerging markets suffered a sharp fall.
As if the flood of the flood gates, the trend of funds fleeing from the emerging economy has intensified. According to the data released by the EPFR (Emerging Markets Fund Research Corporation), which monitors the flow of funds, on February 7, the year-to-date, the outflow of emerging market equity funds has exceeded the full year of last year. EPFR data also shows that some developed markets have become the new favorite of funds this year. The total net absorption of the global developed market base has exceeded 20 billion US dollars, compared with only 2 billion US dollars in the same period last year.
For investors, there are two reasons for fleeing emerging markets. First, the Fed’s exit from the QE policy continues to advance. Second, the growth of emerging market economies is unstable, and its currency is the most vulnerable. The International Monetary Fund (IMF) recently issued a warning that with the withdrawal of quantitative easing, portfolio diversion and capital outflows will still occur in some emerging economies, coupled with domestic institutional deficiencies, capital outflows and exchange rate fluctuations will be more intense.
RMB has no reason for depreciation
In the "beep" of emerging market currencies, the renminbi stands proudly. According to data compiled by Bloomberg, since 2014, among the 24 most important emerging market currencies in the world, only the RMB has appreciated against the US dollar, and the rest have depreciated across the board.
The reason why the renminbi is unique is because China has different economic conditions from other emerging market countries. Experts analyzed that China's trade and balance of payments still maintain a large surplus, while other emerging market countries are deficits, and the RMB exchange rate has no reason to depreciate. At the same time, the Chinese economy is also relatively independent. A survey report by business consulting giant FTI shows that in the face of the Fed's monetary policy adjustment, countries with relatively independent economies such as China and Russia are not affected much.
"Although China's economic growth has declined, it is still higher than other countries. Capital can earn money in China, so the pressure of outflow is small. Even if there is outflow, China's current account surplus can make up for the deficit in the capital account, the future. The renminbi will still face pressure to appreciate.†Sun Huaxuan, deputy dean of the International Business School of Jinan University, told this reporter.
In fact, "the United States has not fundamentally affected China's cross-border capital flows since it talked about QE withdrawal and officially announced the withdrawal of QE." Guan Tao, Director of the Balance of Payments Department of the State Administration of Foreign Exchange, pointed out.
All factors have shown that China has sufficient capacity to withstand the impact of the outflow of funds from the exit of QE. The RMB will not depreciate significantly and will remain stable. Guan Tao said: "The reform dividend will be gradually released, and the Chinese economy has generally maintained steady and rapid growth. The economic fundamentals, financial and financial conditions, and foreign exchange accounts or current account income and expenditure are relatively stable, not to mention the situation. There is also ample foreign exchange reserves."
The exchange rate is broken 6 times this year.
What is the development trend of the RMB exchange rate this year? The market generally believes that the appreciation momentum will remain unchanged, but the increase will narrow, the pace of appreciation will slow down compared with last year, and the two-way fluctuation characteristics will be more obvious.
Zhu Jianfang, chief economist of CITIC Securities, estimates that the appreciation of the renminbi in 2014 will be between 1% and 2%. In addition, with the further advancement of exchange rate marketization, the fluctuation range of the RMB against the US dollar exchange rate is expected to further expand.
Guan Tao pointed out that trade and investment will still maintain a relatively large surplus in 2014. If cross-border capital flows are two-way fluctuations, it means that the future fluctuations of the RMB exchange rate will become a new normal.
“If the Fed withdraws from the quantitative easing monetary policy, if it exceeds expectations or increases its strength, it will lead to exchange rate fluctuations. The renminbi may depreciate in certain periods of time.†E Yongjian, a senior researcher at the Bank of Communications Financial Research Center, analyzed, but the overall economic growth remained stable. Next, China is still an economy that has greater appeal to international capital. Therefore, the exchange rate of the RMB against the US dollar will continue to appreciate slightly in the future, and the volatility will increase. It is expected that the “breaking of 6†against the US dollar in 2014 will be a high probability event.
Capital flight to emerging markets
At the end of last year, the Federal Reserve officially launched the quantitative easing (QE) exit plan, and a large number of international funds began to withdraw from emerging markets. These countries, which rely heavily on capital inflows to develop their economies, experienced a sharp fall in their currencies and affected the European and American stock markets.
In late January, the Turkish lira exchange rate fell to a record low; the Argentine peso against the US dollar fell by a single high in 12 years; the Russian ruble, South African Rand exchange rate also fell. On January 24, European and American stock markets fell sharply. The S&P 500 index fell 2%, and the Dow Jones Industrial Average fell 1.96%. In particular, the stocks of companies close to emerging markets suffered a sharp fall.
As if the flood of the flood gates, the trend of funds fleeing from the emerging economy has intensified. According to the data released by the EPFR (Emerging Markets Fund Research Corporation), which monitors the flow of funds, on February 7, the year-to-date, the outflow of emerging market equity funds has exceeded the full year of last year. EPFR data also shows that some developed markets have become the new favorite of funds this year. The total net absorption of the global developed market base has exceeded 20 billion US dollars, compared with only 2 billion US dollars in the same period last year.
For investors, there are two reasons for fleeing emerging markets. First, the Fed’s exit from the QE policy continues to advance. Second, the growth of emerging market economies is unstable, and its currency is the most vulnerable. The International Monetary Fund (IMF) recently issued a warning that with the withdrawal of quantitative easing, portfolio diversion and capital outflows will still occur in some emerging economies, coupled with domestic institutional deficiencies, capital outflows and exchange rate fluctuations will be more intense.
RMB has no reason for depreciation
In the "beep" of emerging market currencies, the renminbi stands proudly. According to data compiled by Bloomberg, since 2014, among the 24 most important emerging market currencies in the world, only the RMB has appreciated against the US dollar, and the rest have depreciated across the board.
The reason why the renminbi is unique is because China has different economic conditions from other emerging market countries. Experts analyzed that China's trade and balance of payments still maintain a large surplus, while other emerging market countries are deficits, and the RMB exchange rate has no reason to depreciate. At the same time, the Chinese economy is also relatively independent. A survey report by business consulting giant FTI shows that in the face of the Fed's monetary policy adjustment, countries with relatively independent economies such as China and Russia are not affected much.
"Although China's economic growth has declined, it is still higher than other countries. Capital can earn money in China, so the pressure of outflow is small. Even if there is outflow, China's current account surplus can make up for the deficit in the capital account, the future. The renminbi will still face pressure to appreciate.†Sun Huaxuan, deputy dean of the International Business School of Jinan University, told this reporter.
In fact, "the United States has not fundamentally affected China's cross-border capital flows since it talked about QE withdrawal and officially announced the withdrawal of QE." Guan Tao, Director of the Balance of Payments Department of the State Administration of Foreign Exchange, pointed out.
All factors have shown that China has sufficient capacity to withstand the impact of the outflow of funds from the exit of QE. The RMB will not depreciate significantly and will remain stable. Guan Tao said: "The reform dividend will be gradually released, and the Chinese economy has generally maintained steady and rapid growth. The economic fundamentals, financial and financial conditions, and foreign exchange accounts or current account income and expenditure are relatively stable, not to mention the situation. There is also ample foreign exchange reserves."
The exchange rate is broken 6 times this year.
What is the development trend of the RMB exchange rate this year? The market generally believes that the appreciation momentum will remain unchanged, but the increase will narrow, the pace of appreciation will slow down compared with last year, and the two-way fluctuation characteristics will be more obvious.
Zhu Jianfang, chief economist of CITIC Securities, estimates that the appreciation of the renminbi in 2014 will be between 1% and 2%. In addition, with the further advancement of exchange rate marketization, the fluctuation range of the RMB against the US dollar exchange rate is expected to further expand.
Guan Tao pointed out that trade and investment will still maintain a relatively large surplus in 2014. If cross-border capital flows are two-way fluctuations, it means that the future fluctuations of the RMB exchange rate will become a new normal.
“If the Fed withdraws from the quantitative easing monetary policy, if it exceeds expectations or increases its strength, it will lead to exchange rate fluctuations. The renminbi may depreciate in certain periods of time.†E Yongjian, a senior researcher at the Bank of Communications Financial Research Center, analyzed, but the overall economic growth remained stable. Next, China is still an economy that has greater appeal to international capital. Therefore, the exchange rate of the RMB against the US dollar will continue to appreciate slightly in the future, and the volatility will increase. It is expected that the “breaking of 6†against the US dollar in 2014 will be a high probability event.
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