This year, the exchange rate of RMB against the US dollar has weakened again. Analysts believe that the depreciation of the RMB exchange rate is mainly caused by short-term and periodic factors, and further depreciation is limited. Within a controllable and orderly range, fluctuations in the exchange rate of the renminbi help to play the role of an “automatic stabilizer” for exchange rate adjustment of macroeconomics and international payments.

   Differences in economic operations and policies among economies determine the general trend of bilateral exchange rates. However, whether it is the difference in economic growth or the difference in policy environment, it is difficult to explain the phenomenon of RMB depreciation against the US dollar. On the one hand, thanks to the better control of the epidemic earlier, China’s economy has taken the lead in recovering, and supported by the latest policies, the economic performance may be better than other major economies; on the other hand, although China has increased The counter-cyclical adjustment of the policy has introduced some extraordinary measures, but the stable monetary policy orientation has not fundamentally changed, and the interest rate differential between China and the United States is at a historically high level. This shows that trends such as economic growth and policy cycles are not the driving force behind the depreciation of the RMB against the US dollar.

   RMB depreciation is mainly caused by short-term and periodic factors. This is mainly due to the strengthening of the US dollar and the passive depreciation of the RMB.

   It should be noted that these factors are not sustainable, and their impact may decay. Due to the ultra-large-scale monetary easing implemented by the Federal Reserve and the impact of the epidemic slowing, the US dollar index (96.8801, 0.0035, 0.00%) is difficult to rise further. In view of this, considering the relative performance of Sino-US economic growth and policy environment, it is expected that the follow-up RMB will continue to depreciate with limited space. At the same time, my country has relatively abundant foreign exchange reserves. In recent years, it has accumulated rich experience in dealing with exchange rate fluctuations. The reserves of policy instruments are sufficient, making it less likely that there will be disorderly fluctuations in the RMB exchange rate.

  It should be seen that certain fluctuations in the RMB exchange rate are normal and reasonable, and the advantages of controlled and orderly fluctuations outweigh the disadvantages.

   On the one hand, the internal and external economic and financial situation is constantly changing, and the reasonable equilibrium level of the RMB exchange rate should be in a dynamic change; on the other hand, exchange rate fluctuations more reflect the characteristics of marketization, which is in line with the original intention of the RMB exchange rate reform.

  After the exchange rate reform in 2015, the foreign exchange management department emphasized that the market will determine the exchange rate and enhance the two-way floating elasticity of the RMB exchange rate. Since 2018, the two-way floating elasticity of the RMB exchange rate has been significantly enhanced, and the foreign exchange management department has requested to maintain the flexibility of the RMB exchange rate. This all shows that the RMB exchange rate exhibits greater flexibility in line with policy guidance. Enhancing the flexibility of the RMB exchange rate and realizing two-way floating is also a need to increase the initiative and effectiveness of macroeconomic regulation and control, and helps respond to external shocks. In fact, in recent years, in the face of changes in the external environment, the role of “automatic stabilizers” in the exchange rate adjustment of macroeconomics and the balance of payments has been demonstrated.