First of all, the slowdown in economic growth and rising financial risks have weakened the market's optimism about China's future economic situation. On the one hand, since the international financial crisis, China's total social financing and infrastructure investment have grown rapidly, and economic growth relies heavily on the real estate industry, accumulating certain financial risks. With the correction of real estate prices in some cities, the market's pessimistic expectations for China's real estate market are further enhanced. In view of the landization of local finance and the high dependence of corporate financing activities on real estate collateral, the pessimistic expectation of the real estate market directly caused people's risk concerns about local government debt financing platforms and shadow banks. On the other hand, from the macro policy point of view, although the China government has indicated that it will maintain a proactive fiscal policy and a prudent monetary policy this year, the phenomenon that interest rates in the interbank market have risen many times since last year indicates that short-term interest rate fluctuations in China's financial system may occur repeatedly due to liquidity shocks. Faced with this situation, the authorities may increase the selectivity of liquidity operation to punish those institutions that want government assistance, increase moral hazard and opportunistic behavior, and it is unlikely that monetary policy will turn to easing in an all-round way. Concerns about financial risks have become the internal reasons for the withdrawal of some foreign capital from China market and the depreciation of RMB exchange rate.

Secondly, the withdrawal of unconventional monetary policies in developed countries has triggered a partial return of foreign capital. As the current account surplus gradually shrinks, more unstable capital and financial accounts will have a greater impact on the exchange rate. 20 13 in may, federal reserve chairman Ben Bernanke hinted that the scale of quantitative easing policy would be reduced, which led to large-scale capital outflow in some emerging and developing economies and triggered several financial turmoil. Emerging market economies such as India, Indonesia, Brazil, Russia and South Africa have all experienced currency depreciation. In February this year, with the further reduction of quantitative easing policy by the Federal Reserve, emerging markets such as Turkey and Afghanistan experienced turmoil again, and their currencies depreciated sharply. 19 In March, the Federal Reserve decided to reduce its holdings of institutional mortgage-backed securities and long-term treasury bonds by $5 billion respectively. Affected by this policy adjustment of the Federal Reserve, the exchange rate of RMB against the US dollar fell sharply. Although compared with other emerging economies, China's economic fundamentals are relatively good, and its huge foreign exchange reserves are enough to cope with any adverse impact on the RMB exchange rate, the scale reduction and orderly withdrawal of quantitative easing policies in developed economies, as well as the expectation of rising interest rates, will inevitably affect the trend of the RMB exchange rate. For example, according to the data of the central bank, the foreign exchange holdings of financial institutions in China increased by128.2 billion yuan in February, which was about 309 1 billion yuan lower than that in June. At the same time, we need to realize that the adjustment of quantitative easing monetary policy in the United States reflects that after several years of economic downturn, the crisis-hit American economy may embark on a process of relative recovery, which is conducive to the overall appreciation of the dollar against the currencies of all other emerging economies. In this sense, the recent devaluation of RMB is part of the reaction of the currencies of the whole emerging economies to the end of quantitative easing monetary policy in developed countries represented by the United States.

Finally, the reduction of foreign exchange intervention by the central bank has enabled the market to play a fundamental role in exchange rate determination, which has also contributed to the increase of RMB exchange rate fluctuations. In recent years, with the increasing flexibility of RMB exchange rate, the frequency of the central bank's intervention in the market with foreign exchange reserves has been greatly reduced. For the purpose of maintaining monetary stability, the central bank should not deliberately cause a sudden sharp depreciation when the market is bearish on China's economy. More likely, market forces pushed down the RMB exchange rate, and the central bank did not take measures to artificially support the currency. The reason may be that the central bank took the opportunity to further expand the flexibility of the RMB exchange rate. 20 12 government work report proposed to "enhance the two-way floating flexibility of RMB exchange rate", and soon the floating range of RMB exchange rate was expanded from plus or minus 0.5% to plus or minus 1%. This year's government work report clearly puts forward "expanding the two-way floating range of exchange rate", and the floating range of exchange rate has been expanded again. The timely depreciation of RMB just provides the market with an opportunity window to adapt to the two-way fluctuation of exchange rate.

In a word, we believe that the recent RMB exchange rate depreciation is the result of multiple factors, which not only reflects the market's exposure to the potential risks of China's macroeconomic operation and the relative changes in the growth rate between China and other developed economies, but also reflects that China's RMB exchange rate mechanism is developing in a more market-oriented direction.