Devaluation Does Not Mean That The Renminbi Will Fall Sharply.

The Greek election at the weekend was the main reason for the depreciation of the RMB exchange rate.

The Greek leftist radical coalition won the general election, and leader Tsipras (ALEXIS TSIPRAS) said he would negotiate with the Greek aid program and plan to abandon the previous tightening policy tied to the aid plan.

Affected by this, the euro has opened more than 100 points against the US dollar for 26 days, refreshed 11 years low 1.1096, and pushed the US dollar and Japanese yen to become safe haven currencies.

The sharp drop in the spot exchange rate is a direct result of this series of events.

However, after the announcement of the quantitative easing and Greek elections, the euro zone's profits are temporarily exhausted. The euro's sharp fall and the US dollar's soaring trend are expected to slow down, and the decline of the renminbi will also narrow down with the micro-blog's announcement.

In the case of strong economic recovery, the Fed's interest rate increase appears to be a foregone conclusion, and the time point of interest rate increase has become a major factor affecting the market.

The market expected that the Federal Reserve would start raising interest rates in the middle of this year, but because of the sharp fall in oil prices, the US prices will be downward. Under the pressure of low inflation, the Fed's interest rate hike is likely to be postponed until September.

Anyway, this boot is likely to land in the year.

Will withstand a new round of devaluation pressure.

Observing the international market, most of the eyes are focused on the European and American markets, and the policy has been frequent in recent months.

In particular, in the European market, the Swiss central bank abandoned the fixed exchange rate lower limit first. After the European Central Bank announced the volume and the Greek elections, several major uncertainties were settled. Last year, the bustling international exchange market is expected to stabilize temporarily. The largest remaining Black Swan may be China's economic downward pressure beyond expectations.

In fact, the depreciation of the RMB exchange rate in recent period is closely related to the slowdown in China's economy.

In 2014, China's GDP grew by 7.4% over the same period last year, slipping to a new low since 1990, of which the four quarter grew by 7.3% over the same period last year.

In 2015, China's economy will continue to bear pressure. With the growth of GDP, the main economic indicators such as investment, consumption, industrial production and money supply (M2) will be further explored.

The market may anticipate the slowdown of GDP, but if there is only one digit growth in investment and consumption, this super expected decline will have a significant impact on market psychology.

But what is more important is the attitude of the Chinese government.

From 2013 to 2014, the Chinese government was facing the pressure of economic downturn.

Observed one to two quarters, and then launched the "steady growth" policy, trying to stabilize the economic growth rate on the annual target.

But with the sustained growth of economic volume and the decline of potential growth rate, "steady growth"

The role played by the Chinese government is becoming smaller, and the Chinese government has also downplayed the economic growth target.

At the central economic work conference held at the end of last year, rumors have already lowered the economic growth target of 2015, and the specific scope is not clear. It needs to be announced during the "two sessions" in March 2015.

Since the start of the "two sessions" held since the beginning of the year, it has become a mainstream trend to reduce economic growth expectations or simply weaken GDP indicators.

The Chinese government can calm down in the face of the decline of GDP speed, which means that the possibility of stimulating policies will be further reduced.

For the market that has been expected to cut interest rates since the fourth quarter of last year, the delay in "steady growth" may mean that policy easing expectations are temporarily hard to materialize, which may impact the market.

Whether China's downward pressure on the economy is beyond expectations will become the focus of attention in the next stage of the international exchange market, and the RMB exchange rate will also bear more pressure.

Within two years, under the dual pressure of China's economic downturn and the Fed's interest rate hike, the value of the RMB against the US dollar will probably depreciate to around 5%, to 6.5.

Compared with the depreciation rate of more than 20% of the euro and yen, the fall of the RMB against the US dollar will remain moderate and controllable, because in the short term, although the Chinese economy is down, it is still unlikely that there will be systemic risk of stall. The Chinese government will also keep the bottom line of the systemic risk.

In fact, moderate depreciation has many advantages for China's economy. At the moment when the US dollar appreciates substantially against other non US currencies, it is not wise to continue to follow the US dollar appreciation.

Moderate depreciation is not only in line with the economic trend of China and the United States, but also conducive to the release of China's economic risks.

However, a depreciation of more than 5% is probably not what the Chinese government would like to see.

From 2015 to 2016, the "one belt and one way" strategy will be implemented from paper. The stable exchange rate of RMB will be the key to ensure the smooth progress of "one belt and one road".

In short, although the renminbi is facing some devaluation pressure, even if the depreciation occurs, the rate is still moderate and controllable.