Its purpose is to interrupt the continuous appreciation trend of RMB and prevent the expectation of RMB appreciation from over-expanding.
We predict that it is unlikely that the RMB will continue to maintain such a rapid upward trend in the future.
First, the central bank has noticed the "abnormal" upward trend of the RMB and released a stable signal. If the appreciation trend does not decrease, then the central bank may continue to shoot in the future.
Secondly, at present, the RMB exceeds 6.50, which is already a relatively low level of buying dollars. After the measures of the central bank come out, the expectation of appreciation will be affected to some extent. The purchase of foreign exchange may be bargain-hunting, and the settlement will converge accordingly, waiting for a more competitive settlement price in the future, thus suppressing the appreciation of the RMB.
Third, the trade surplus will narrow under the pressure of appreciation, weakening the foundation of the strong RMB. At present, the price increase of raw materials and intermediate products in China is not due to the continuous expansion of demand side, but to the contraction of supply, which can also be seen from the poor transmission of PPI to CPI.
Compared with consumer goods, the structure of tradable goods is more similar to industrial products. The continuous rise in the prices of domestic industrial products has lowered the prices at home and abroad and weakened the competitiveness of China's export commodities. The prices of some domestic commodities, such as rebar, have surpassed those of the European Union and the United States. This narrowing of the price difference between China and foreign countries has accelerated the replacement of domestic products by imports. We have seen that since August last year, the growth rate of imports has continued to be faster than that of exports.
The appreciation of the RMB against the US dollar and a basket of currencies will gradually be reflected in the import and export. Under the double pressure, it is expected that the trade surplus will be gradually squeezed. This will weaken the foundation of RMB strength, because although short-term capital flows have a more obvious impact on the exchange rate, in the long run, the exchange rate is still determined by fundamental factors such as trade surplus.