The depreciation of the RMB refers to the depreciation of the exchange rate of the RMB in the foreign exchange market relative to other currencies. So what is the reason for the depreciation of the RMB? What is the impact of RMB devaluation? Below we have prepared relevant content for your reference.

What is the reason for the devaluation of the RMB?

There are many reasons for the depreciation of the RMB. The following are some common reasons:

1. Economic cycle

The RMB exchange rate will be affected by the stage of domestic economic development and the international economy. The influence of environmental and other factors. For example, when economic growth slows down or is in a downturn, the market expects that it will lead to capital outflows, a decline in investor confidence, etc., which will in turn trigger a decline in the RMB exchange rate.

2. External pressure

Affected by factors such as international relations, international policies, international trade and geopolitics, the RMB exchange rate may also fluctuate. For example, if the U.S. dollar exchange rate rises, other currencies tend to depreciate in relative terms, which may cause the RMB exchange rate to weaken.

3. Monetary policy

Adjustment of monetary policy is an important factor in the fluctuation of RMB exchange rate. The central bank controls money supply and liquidity by adjusting interest rates and reserve ratios, thereby affecting exchange rate changes. For example, if the central bank raises interest rates, it may attract more funds to flow into the RMB market, thereby increasing the exchange rate. On the contrary, it may cause the RMB exchange rate to fall.

What is the impact of RMB devaluation?

1. Promote exports: If the RMB depreciates, my country's exports will be relatively cheaper, thus helping to improve export competitiveness. This helps stimulate our country's economic growth and can help improve our country's trade surplus.

2. Increase inflation: If the RMB depreciates, the price of my country’s imported goods will rise, leading to inflation. This may reduce consumer purchasing power and thus have a certain negative impact on the economy.

3. Increase the risk for savers: The depreciation of the RMB will also worry those who hold the RMB, because the purchasing power of their money will decrease. If the RMB depreciates too quickly, savers may transfer large amounts of funds to other currencies or investment channels, further affecting my country's financial stability.

4. Impact on the global economy: RMB is one of the major currencies in international trade and financial transactions. If the RMB depreciates, the currencies of other countries may be affected, especially in countries and regions closely related to my country's trade.