Why does the RMB continue to appreciate in 2021?

Since April this year, the exchange rate of RMB against the U.S. dollar has risen all the way up. As of June 3, the onshore RMB exchange rate against the U.S. dollar reached 6.4. The RMB rose above 6.4. We are convinced that the situation is brought by the following two main reasons :

First, from an international point of view, the strengthening of the RMB is due to the weakening of the US dollar. At the beginning of the year 2021, people were expecting that after the strong fiscal stimulus, the U.S. economy would grow strongly.

At the same time, people are also worried that after economic growth, the United States will soon tighten its monetary policy, which will increase inflationary pressures. But according to Fed’s explanation: the inflationary pressure is temporary. But this still led to lower expectations for economic growth, and eventually, the RMB appreciated.

Second, from the perspective of China’s trade market, the global demand for Chinese goods has promoted the appreciation of the RMB, foreign capital continues to be optimistic about the Chinese market, and cross-border funds flow into China.

In terms of assets, the RMB is now the most stable currency among the international reserve currencies, and it is also the currency with the highest rate of return on risk-free assets. This makes the RMB much more favored by the investors, which is why the international demand for RMB has grown substantially.

Of course, the appreciation of the RMB is a double-edged sword, with pros and cons. In terms of benefits, first of all, it saves more money for cross-border consumption in China. Second, the beneficiary industries have increased. Consumer industries with foreign currency liabilities such as aviation and tourism, as well as manufacturing industries that are linked to import costs, such as papermaking and refining, will benefit from reducing import costs.

How about the disadvantages? For foreign customers who want to import from China, if the RMB appreciates too fast, the increase in raw materials and the shipping cost will increase the overall cost.

Therefore, it is important that the RMB exchange rate stay basically stable at a reasonable and balanced level.

The appreciation of the RMB is not such good news for companies that want to import from China, which means rising costs in all aspects. But the situation can be avoided. HiGlobal always provides you with the safest, most efficient, and cost-saving service. We help you in product sourcing, price negotiation, factory audit, QC, legal support, and after-service. Making you more resilient in the global value chain and protect your business and family from beginning to end is what we are doing. Get in touch with us to start a profitable business NOW!

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