Compared with other currencies, the purchasing power of RMB has increased. The reason of RMB appreciation comes from the internal motivation and external pressure of China's economic system. The internal influencing factors are balance of payments, foreign exchange reserves, price level and inflation, economic growth and interest rate level.

Extended data:

Exchange rate refers to the exchange rate between two currencies, and can also be regarded as the value of one country's currency against another's currency. Specifically, it refers to the ratio or parity between one country's currency and another country's currency, or the price of another country's currency expressed in one country's currency.

Exchange rate changes have a direct regulatory effect on a country's import and export trade. Under certain conditions, by devaluing the local currency, that is, letting the exchange rate rise, it will promote exports and restrict imports; On the other hand, the appreciation of the domestic currency, that is, the decline of the exchange rate, plays a role in restricting exports and increasing imports.

Import and export

Generally speaking, the reduction of the local currency exchange rate, that is, the depreciation of the foreign ratio of the local currency, can promote exports and curb imports; If the exchange rate of local currency rises, that is, the ratio of local currency to the outside world rises, which is beneficial to imports and unfavorable to exports.

price

From the perspective of imported consumer goods and raw materials, the decline of exchange rate will cause the domestic price of imported goods to rise. As for the impact on the overall price index, it depends on the proportion of imported goods and raw materials in the gross national product. On the other hand, other things being equal, the price of imported goods may fall, and its influence on the overall price index depends on the proportion of imported goods and raw materials in the gross national product.

capital flow

Short-term capital flows are often greatly influenced by exchange rates. When the local currency depreciates, domestic investors and foreign investors are unwilling to hold various financial assets denominated in local currency, and will convert them into foreign exchange, leading to capital outflow. At the same time, due to the continuous exchange of foreign exchange, the demand for foreign exchange is in short supply, which will push the local currency exchange rate further down. On the other hand, when there is a trend of appreciation of local currency abroad, domestic investors and foreign investors try to hold various financial assets denominated in local currency, which will lead to capital inflows. At the same time, since foreign exchange has been converted into local currency, the oversupply of foreign exchange will further promote the exchange rate of local currency.