What does the appreciation or depreciation of RMB mean?

The impact of RMB appreciation and depreciation has both advantages and disadvantages:

1. Looking at appreciation and depreciation from the beneficial aspect:

Appreciation:

1. A country's currency can appreciate, which generally indicates that its economy is in good condition. Because under normal circumstances, only when the economy grows healthily and steadily can the currency appreciate. This stable and rising currency brought about by good economic conditions is extremely attractive to foreign investment.

2. China still has a high foreign trade surplus and huge foreign exchange reserves, and China's economic growth is still the most scenic spot in the world, so the long-term trend of currency appreciation will not change.

3. It is beneficial to relieve the pressure of servicing foreign debts. With the rise of RMB exchange rate, the amount of local currency required for servicing outstanding foreign debts is correspondingly reduced, thus reducing the foreign debt burden to some extent.

4. RMB appreciation can reduce inflationary pressure and effectively cool the overheated macro-economy. Due to the undervaluation of RMB exchange rate, a large amount of international hot money flowed into China, which caused the economy to overheat and the real estate bubble to expand. The appreciation of RMB can effectively solve this problem.

5. The appreciation of RMB is also conducive to industrial upgrading and the reform of China's economic structure, the transfer of industries to poverty-stricken areas in the central and western regions, and the development of service industries and non-trade industries.

devaluation:

1. If the local currency depreciates, the purchasing power of foreign currency will be strong, so that a certain amount of foreign currency can buy more domestic products, which means that domestic products are relatively cheap in the international market, thus increasing exports.

2. If the local currency depreciates, the price of foreign goods will be expensive, which will inevitably reduce domestic imports. Therefore, the result of RMB depreciation is to expand exports, restrain imports, increase trade surplus and promote economic development.

2. Look at appreciation and depreciation from the disadvantages:

Appreciation:

1. The economic effect of RMB appreciation is equivalent to an overall increase in the price of export commodities. Of course, the consequence is to curb exports, which is obviously not conducive to economic development.

2. The rapid appreciation of RMB will reduce foreign direct investment. If the RMB appreciates, it means that foreign investors have to pay more dollars, and the consequence is that foreign investment will decrease.

3. It will lead to an increase in unemployment. In China, exports account for about 3% of GDP. If the local currency appreciates, export enterprises will inevitably lose money or even close down, which will lead to unemployment and further increase the hidden danger of social instability.

4. It will lead to further expansion of foreign debt. With the appreciation of RMB exchange rate, it will attract a large amount of capital to flow into China's capital market and expand China's foreign debt accordingly.

5, affecting the stability of the financial market. Most of the capital market is active in international hot money, which is a potential factor for financial market turmoil because of its large scale, fast flow and strong profitability. In the case that China's financial supervision system needs to be further improved and the development of the financial market is relatively lagging behind, the profit-seeking behavior of a large amount of short-term capital flowing into the capital market through various channels will easily lead to monetary and financial crises, which will adversely affect the sustained and healthy development of China's economy.

devaluation:

1. The devaluation of the local currency will cause trade friction, which is extremely unfavorable to the stability of the national economy.

2. Depreciation will not solve the problem of slowing external demand. Although depreciation will help export enterprises survive by reducing costs, it is difficult to last. Especially for industries that have lost their competitiveness in China, depreciation will only delay the withdrawal of industries.

Extended information:

Apart from the choice of unilateral appreciation and depreciation of the RMB exchange rate, the overall relatively stable exchange rate remains relatively stable, which is also a choice of exchange rate changes and probably the most desirable reform idea of the RMB exchange rate under the current turbulent international economic situation.

The Central Economic Work Conference held on December 8th, 28 also proposed to "keep the RMB exchange rate basically stable at a reasonable and balanced level and further improve the balance of payments". In fact, this view is essentially the same as what has been emphasized since the exchange reform. However, no matter which side they stand on, or hold high the banner of maintaining stability, all parties have their own reasons and logic.

Baidu encyclopedia-RMB exchange rate