Exchange rate fluctuations have a multi-dimensional impact on the production and operation of foreign trade enterprises, which is related to the company’s bargaining power, cost-effectiveness and other aspects. Therefore, foreign trade enterprises are particularly sensitive to exchange rate fluctuations, which is the focus of their daily operation.
Recently, Premier Li Keqiang chaired a symposium of experts and entrepreneurs, and proposed to expand high-level opening-up, do a good job in stabilizing foreign trade and foreign investment, maintain the basic stability of the RMB exchange rate at a reasonable and balanced level, and effectively deal with the uncertainty of the external environment.
Since this year, the RMB exchange rate against the US dollar has maintained two-way fluctuations. According to the data, as of the closing on April 8, the onshore RMB exchange rate against the US dollar was 6.3644, with an appreciation of 0.14% during the year; The offshore RMB exchange rate against the US dollar was reported at 6.3689, with a year to date depreciation of 0.07%.
China Everbright Bank Company Limited Co.Ltd(601818) financial market macro researcher Zhou Maohua said in an interview with Securities Daily that in the short term, complex factors such as the global epidemic, the international geopolitical situation and the policy changes of developed economies are bound to increase the fluctuation of RMB exchange rate. However, taking into account that China’s economy is expected to operate within a reasonable range, with sufficient foreign trade toughness, basically stable balance of payments and sufficient flexibility of RMB, It is expected that the RMB will fluctuate around the equilibrium level in the short term; In the medium and long term, with the continuous release of China’s reform and opening-up dividends, the optimization of economic structure, the continuous improvement of resource allocation efficiency, the new development pattern of double cycle, the release of economic potential, the internationalization of RMB, the continuous enhancement of the attraction of RMB assets, and the medium and long-term rise of RMB exchange rate.
“The trend of RMB exchange rate is mainly affected by factors outside China, but at different stages and time points, Chinese and international factors have different effects on RMB exchange rate.” Bank Of China Limited(601988) Research Institute senior researcher Wang Youxin told the reporter of Securities Daily. In the short term, the current factors affecting the exchange rate are mainly the trend of monetary policy of the Federal Reserve and the change of interest rate difference between China and the United States, as well as the trade surplus and capital flow. Recently, under the influence of the Fed’s continuous release of information such as a substantial interest rate hike and the imminent start of table contraction, the US dollar index once rebounded to more than 100, the US bond yield curve moved up rapidly, and the interest rate gap between China and the United States continued to narrow, which affected the trend of the RMB exchange rate to a certain extent and led to a slight correction of the RMB exchange rate. However, considering that China’s trade surplus remained at a high level, China’s cross-border capital inflows generally rebounded in March, and the supply and demand in the foreign exchange market continued to be basically balanced. Therefore, compared with other emerging market currencies, the RMB is less affected by the US dollar index and has a relatively independent trend, highlighting the resilience of the RMB exchange rate.
Wang Youxin believes that in the medium and long term, under the background of China’s sustained medium and high-speed economic growth, innovative development of manufacturing industry and continuous promotion of financial marketization reform, the investment and risk aversion properties of RMB will continue to highlight, foreign capital will continue to allocate RMB assets, and the RMB exchange rate is expected to maintain a stable trend.
Nevertheless, foreign trade enterprises should take precautions. Zhou Maohua said that foreign trade enterprises should focus on their main business, enhance product added value and enhance international competitiveness; Sort out the concept of exchange rate risk neutrality, make good use of foreign exchange derivatives and manage the risk of foreign exchange fluctuations.
“For enterprises, under the background of the Fed’s accelerated interest rate hike and the increased volatility of the international financial market, the short-term volatility and adjustment range of the exchange rate have become larger, which has brought more challenges to the steady operation of foreign trade enterprises.” Wang Youxin suggested that foreign trade enterprises should establish a risk neutral awareness, enhance the awareness of risk avoidance, and do not gamble on the unilateral appreciation or depreciation of the exchange rate. They should be based on the main business, carefully arrange the currency structure of assets and liabilities, and reasonably use foreign exchange derivatives to hedge exchange rate risk. At the same time, we can also consider more use of RMB valuation and settlement, or agree on the exchange rate compensation mechanism in the contract, so as to reduce the impact of exchange rate fluctuations on enterprise product pricing and financial costs.
