News Center

The picture shows the trend of onshore RMB

Tencent Financial News on August 5, as of 9: 33, the onshore RMB fell below 7 yuan against the US dollar.

As of 9: 18, the offshore RMB fell below the 7 yuan mark against the US dollar, with a minimum of 7.0451.

The central parity rate of RMB against the US dollar was 6.9225 today, down 229 points.

The central parity rate of the renminbi against the US dollar fell below the 6.90 mark for the first time since December last year.

Affected by the decline in the external market, the Shanghai and Shenzhen call auction inertia opened lower in early trading. The Shanghai Index fell 0.46 to 2854 points; the Shenzhen Composite Index fell 0.47 to 9093 points; the ChiNext Index fell 0.28 to 1552 points. From the disk point of view, titanium dioxide, ETC and pork and other sectors rose against the market; insurance, brokerage and other large financial sectors fell first.

The central bank to explain the RMB broke 7: the exchange rate is fully able to maintain basic stability at a reasonable equilibrium level.

At about 10:36 on August 5, the relevant person in charge of the People's Bank of China answered a question from a reporter from the Financial Times on issues related to the RMB exchange rate.

　　Reporter: Why is the RMB exchange rate "broken 7"?

Answer: Affected by unilateralism and trade protectionist measures and the expectation of imposing tariffs on China, the exchange rate of the renminbi against the US dollar has depreciated today, breaking through 7 yuan, but the renminbi continues to remain stable and strong against a basket of currencies. This is the market. A reflection of supply and demand and fluctuations in the international foreign exchange market.

China implements a managed floating exchange rate system based on market supply and demand, with reference to a basket of currencies. Market supply and demand play a decisive role in the formation of the exchange rate, and the fluctuation of the RMB exchange rate is determined by this mechanism, which is the proper meaning of the floating exchange rate system. From the perspective of the global market, as a price comparison between currencies, exchange rate fluctuations are also the norm. With fluctuations, the price mechanism can play the role of resource allocation and automatic adjustment. If you look back at the changes in the RMB exchange rate over the past 20 years, you will find that the RMB has been more than 8 yuan against the US dollar, as well as more than 7 yuan and more than 6 yuan. Now the RMB exchange rate has returned to more than 7 yuan. What needs to be explained is that the RMB exchange rate "breaks 7". This "7" is not an age. It will not come back in the past, nor is it a dam. Once it is broken through, the flood will pour thousands of miles; "7" is more like the water level of a reservoir. It is higher during the wet season, and it will fall again during the dry season. It is normal to rise and fall.

Although the RMB has depreciated against the US dollar recently, historically, the RMB has appreciated in general. In the past 20 years, the nominal effective exchange rate and real effective exchange rate of RMB calculated by the Bank for International Settlements have appreciated by about 30%, and the exchange rate of RMB against the US dollar has appreciated by 20%, making it the strongest currency among the major international currencies. Since the beginning of this year, the RMB has maintained a stable position in the international monetary system. The RMB has strengthened against a basket of currencies, and the CFETS RMB exchange rate index has appreciated by 0.3. From the beginning of 2019 to August 2, the yuan depreciated 0.53 percent against the U.S. dollar, less than the decline in the exchange rate of emerging market currencies such as the Korean won, the Argentine peso, and the Turkish lira against the U.S. dollar over the same period, and is the more stable of emerging market currencies and stronger than reserve currencies such as the euro and the British pound.

　　Reporter: What will happen to the RMB exchange rate after "breaking 7?

Answer: The trend of the RMB exchange rate depends on fundamentals in the long run. In the short term, market supply and demand and the trend of the US dollar will also have a greater impact. The market-oriented exchange rate formation mechanism is conducive to the role of price leverage in regulating the balance of supply and demand, and plays the role of an "automatic stabilizer" of the economy and the balance of payments at the macro level. As a large country, China has a complete range of manufacturing industries, a relatively complete industrial system, a strong competitiveness of the export sector, and a moderate degree of import dependence. The fluctuation of the RMB exchange rate has a strong regulatory effect on China's balance of payments, and the foreign exchange market itself will find equilibrium.

From a macro perspective, China's current economic fundamentals are sound, economic restructuring has achieved positive results, growth resilience is strong, macro leverage ratio remains basically stable, fiscal situation is stable, financial risks are generally controllable, balance of payments is stable, cross-border capital flows are generally balanced, and foreign exchange reserves are sufficient, all of which provide fundamental support for the RMB exchange rate. Especially in the context of the current easing of monetary policy in developed economies such as the United States and Europe, China is the only country among the major economies whose monetary policy remains normal, and the valuation of RMB assets is still low and the stability is correspondingly stronger. China is expected to become a "depression" of global funds ".

In recent years, in the process of dealing with exchange rate fluctuations, the people's Bank of China has accumulated rich experience and policy tools, and will continue to innovate and enrich the regulatory toolbox. In view of the possible positive feedback behavior in the foreign exchange market, it is necessary to take necessary and targeted measures, resolutely crack down on short-term speculation, maintain the smooth operation of the foreign exchange market, and stabilize market expectations. The People's Bank of China has the experience, confidence and ability to keep the RMB exchange rate basically stable at a reasonable and balanced level.

　　Reporter: What is the impact of the RMB exchange rate "breaking 7" on enterprises and residents?

Answer: Reform and opening up is China's basic national policy. Foreign exchange management must adhere to reform and opening up, further enhance cross-border trade and investment facilitation, and better serve the real economy. This policy orientation will not change after the "breaking 7.

For ordinary people, in the past 20 years, the renminbi has risen more against the U.S. dollar and a basket of currencies, and less when it has depreciated. The main financial assets of the Chinese people are best protected in the renminbi, and their external purchasing power has steadily increased. These can be reflected in the people traveling abroad, shopping abroad, and their children going to school overseas.

The same goes for businesses. We do not want companies to be too exposed to exchange rate risk and support companies to buy exchange rate hedging products to avoid exchange rate risk. At the same time, it should also be noted that at present, the RMB exchange rate may either depreciate or appreciate, and two-way floating is the norm, and it is difficult for not only enterprises, but also more professional financial institutions to predict the trend of the exchange rate.

Therefore, we suggest that we should focus on physical business, do not spend too much energy on judging or speculating on exchange rate trends, and establish a "risk neutral" financial concept. The purpose of foreign exchange derivatives should be to lock in foreign exchange costs, reduce the uncertainty of production and operation, and realize the profit of the main business, rather than the profit of foreign exchange derivatives trading itself.

　　1. why are many people afraid of the dollar against the yuan exchange rate broke 7?

The RMB exchange rate 7 is a test of market confidence: below 7, it means that the RMB exchange rate is generally in a controllable and stable range; if it exceeds 7, it means that cross-border capital flows, imports and foreign reserves will have varying degrees of volatility.

In fact, 7 and 6.9 or 7.1, from the exchange rate point of view, there is not much difference, the difference between them, the most important thing is a psychological price and market behavior.

In fact, the RMB exchange rate also follows such a psychological logic. As long as the exchange rate is controlled within 7, the market will not expect too much depreciation of the RMB. Once the psychological threshold of 7 is broken, the market will think that the RMB will have a lot of room for devaluation in the future, and the market has always been chasing up and down. Once the RMB breaks through the 7 mark, there will be a lot of funds to short the RMB, at that time, China's exchange rate control may even fail, once the foreign exchange control fails, the pressure of RMB depreciation will rise sharply.

On May 26, 2017, the central bank launched the countercyclical factor of the central parity for the first time. The central parity of the RMB against the US dollar continued to strengthen, and the RMB basket exchange rate also bottomed out and rebounded strongly; by January 2018, the RMB exchange rate against the US dollar increased from May 2017. After the 6.88 appreciation to 6.44, the central bank announced the suspension of the countercyclical factor; within a few months, the RMB exchange rate against the US dollar once rose to between 6.2 and 6.3.

In July 2005, China began to implement the floating exchange rate system, since then opened the prelude to the reform of the RMB exchange rate formation mechanism. And the floating exchange rate, so that China's decades of growth dividends have been released, the yuan all the way up. By August 2008, the RMB exchange rate against the US dollar had appreciated from 8:1 to around 6.8:1, with an appreciation rate of 15%, hovering near the 7 mark.

　　2. RMB "breaking 7" is a good thing or a bad thing?

Tan Yaling: RMB "breaking 7" is a good thing or a bad thing must be clearly demonstrated

Regarding the future trend of the renminbi, Tan Yaling, chief economist of the China Institute of Foreign Exchange Investment, pointed out in mid-July that the exchange rate should be evaluated from a market perspective, so that companies will be relatively prepared. At the same time, it must be clearly demonstrated whether the RMB "breaking 7" is a good thing or a bad thing. If it was too sensitive in the past, its sensitivity should be diluted.

Tan Yaling pointed out that the range of RMB fluctuations will become larger and larger, and the test for enterprises will become larger and larger. It is necessary to evaluate the exchange rate from the perspective of the market, so that enterprises will be relatively prepared.

Sheng Songcheng: The current RMB exchange rate broke "7" more harm than good

Sheng Songcheng, former director of the investigation and Statistics Department of the people's Bank of China, issued a document in May that the current RMB exchange rate breaking "7" does more harm than good, and if the exchange rate falls below the key point, it may have a greater impact on market confidence and increase the pressure of capital outflow. it is even possible to "give people a handle" in the future Sino-US economic and trade negotiations, making the problem more complicated and leading to an escalation of trade friction.

At present, the United States does not list China as a currency manipulator. In fact, a sharp devaluation of the RMB is also what the US side does not want. What's more, we can't continue to rely on low prices to gain competitive advantage. Let the devaluation of the RMB, it is difficult to encourage enterprises to improve product quality, enhance the core competitiveness. Of course, the exchange rate should not be allowed to appreciate significantly, and the overshoot of the RMB exchange rate in the direction of appreciation should also be avoided.

At present, China's central bank adheres to a prudent monetary policy to be moderately loose and tight, keep the total gate of the money supply well, do not engage in "flooding", while maintaining a reasonable abundance of liquidity, broad money M2 and social financing scale growth rate to match the nominal growth rate of GDP. The combination of a prudent monetary policy and a proactive fiscal policy has promoted the growth of my country's domestic demand. It is good for the export and GDP growth of trading partner countries. At the same time, it is conducive to domestic risk prevention, reform, and stable growth, and it is also conducive to avoiding the birth of asset price bubbles., Causing negative spillover effects.

Yu Yongding: RMB exchange rate break 7 will not bring a catastrophe?

Yu Yongding, a member of the Chinese Academy of Social Sciences, said that if China wants to maintain the independence of monetary policy and maintain economic growth, it may adopt further monetary easing policies. Once we adopt such a policy, sooner or later we will face the question of whether to allow the RMB to break 7 again. In Yu Yongding's view, there will be no catastrophe in the RMB exchange rate from 7 to 7.1, and the exchange rate should be allowed to shake around 7.

"The current macroeconomic situation requires us to make the exchange rate more flexible." Yu Yongding pointed out that unless the situation of foreign trade and economic growth improves, China will implement a more relaxed fiscal and monetary policy sooner or later, and such a policy will conflict with the goal of "protecting 7.

In his view, worrying about the RMB breaking 7 will bring "disaster" is completely frightening himself. And Yu Yongding also does not believe in the view that "if the RMB breaks 7, there will be panic and a large amount of capital will flee, and the situation will be out of control. He believes that China has a current account surplus and will not have great exchange pressure.

Yu Yongding said that capital flight is not as easy as in 2015 and 2016. One part of cross-border capital flow is legal. For example, foreign capital repatriates profits and foreign capital withdrawals are legal and there is no problem. But this is a relatively long-term decision, and foreign capital will not withdraw a large amount of profits in the short term.

Yu Yongding explained that prices are a regulating lever in the world economy, as is the exchange rate. Exchange rate is a kind of stable capital flow, stable financial cross-border flow, so that our current account and our capital account, in general, is an important adjustment mechanism to make the balance of payments tend to balance.

"Now let it shake between 7 and 7.1 and 7.2 return to 6.9, so that there will be no big problem for everyone to adapt." If the situation worsens, we need to adopt large-scale stimulus policies. "Instead of waiting for it to break 7 at that time, it is better to let it shake at 7 now, which is controllable. We should use a more natural psychology, a more relaxed psychology to look at exchange rate movements. 7.7.01 and 7.02 are no different from 6.9 and 6.95, and we should have confidence in China's economic development."

　　3. RMB Breaks 7 Impact on Stock Market, Gold, Bitcoin

The depreciation of the RMB has a broader impact on the market, as follows:

1, the international gold surge

International gold broke the $1450 mark, up 0.7 percent in the day. Risk aversion rose gold concept stocks, Hengbang shares rose more than 8%, Yintai resources, Shandong gold rose more than 5%, Hunan gold, Chifeng gold, CICC gold, etc. have followed the rise.

2, textile and other plates to welcome good

　　The devaluation of the renminbi is a big benefit to exports. Generally speaking, textiles (for every 1% depreciation of the RMB, the profit margin of sales in the textile and garment industry will rise by 2% to 6%), home appliances, overseas engineering construction (overseas contracts are mostly denominated in US dollars, with RMB as the unit of account), and overseas business will directly benefit from the depreciation of the RMB.

The relevant concept stocks are as follows:

Huafang Co., Ltd.: the company's main business is cotton, chemical fiber textile and printing and dyeing finishing, cotton and chemical fiber products, clothing, clothing production, processing and sales. Source overseas revenue accounted for 84.16 of total revenue in 2018.

Fengzhu Textile: For every 1% devaluation of RMB, the sales profit margin of textile and garment industry increased by 2% to 6%. The company mainly deals in knitting and weaving, dyeing and finishing, bleaching and dyeing bobbin color yarn, shoe production, etc.

Nanfang shares: the main business for import and export trade business and domestic bulk trade business, Europe and the United States business accounted for 42.8

Jia Linjie: The company is a textile fabric production company. The 2018 semi-annual report shows that the company's export revenue is the 0.341 billion, accounting for 86% of operating income.

Huaseng shares: mainly engaged in ramie and bamboo garden fiber textiles, 17 years annual report export accounted for 80.9

Modern Avenue: Specializing in the management of Canudi Road (CANUDILO) brand high-end men's clothing enterprises, products cover suits, shirts, jackets and trench coats and other nine categories, in 2018 the source of overseas revenue accounted for 56.50 of the total revenue.

Yingke Medical: a supplier of integrated medical care products, including disposable PVC and nitrile gloves, with overseas revenue accounting for 96.39 percent of total revenue in 2018. On May 13, it was stated on the interactive platform that more than 95% of the company's products are exported abroad and settled in U.S. dollars. The sharp depreciation of the renminbi will have a positive impact on the company's performance.

With the shares: the main security video surveillance products hard disk video recorders, cameras and video surveillance management platform research and production and sales. Source overseas revenue accounted for 92.97 of total revenue in 2018.

Fengshen shares: Mainly engaged in the export business of tires and related technologies produced by the company. The company's products are the main supporting products for transportation and construction vehicles. They are exported to more than 140 countries and regions on five continents including America and Europe. In 2018, overseas revenue accounted for 41.27 of total revenue.

Galaxy Magnet (superimposed super high-speed rail concept), Zhaoxin shares (superimposed Baoneng card), Chuanyi Technology, Star Emblem Precision, Zhejiang Dingli, Times New Material, Dengyun shares, Su-Jiaoke.

Zhongyuan Home: Main sofa research and development, design, production and sales, product sales to OEM-based, mainly sold to the United States and other overseas markets. In 2017, overseas market revenue was 0.782 billion yuan, accounting for 99.90 of the total revenue.

Yanjiang shares: The company is a high-quality enterprise of domestic diapers, positioning "global supplier of innovative surface materials", and actively expand the Indian and U.S. markets. In the first half of 18 years, 0.158 billion yuan was exported, accounting for 49.5 of the total revenue.

Other: Steyr, Galaxy Magnet (superimposed super high-speed rail concept), Zhaoxin shares (superimposed Baoneng card), Chuanyi Technology, Star Emblem Precision, Zhejiang Dingli, Times New Material, Dengyun shares, Su-Jiaoke and other revenue from overseas, also benefit from the devaluation of the RMB.

3, Bitcoin and other digital currencies have risk-averse properties.

Affected by this, the block chain plate opened high, Omar electrical appliances, Xinchen technology sealing board, accurate information, Morningside technology, Julong shares have strengthened.

　　How does the devaluation of the 4. yuan affect your money bag?

The devaluation of the RMB generally includes active and passive devaluation. The active devaluation of the renminbi is generally based on the current macroeconomic situation, and the Central Bank of China takes the initiative to adjust the central parity of the renminbi against the US dollar (increase) to reflect the devaluation. The active devaluation is a national macroeconomic means. In the overall situation, it is for most of us. It is beneficial and harmless. The passive depreciation of the RMB generally refers to the substantial appreciation of the currencies of other countries (generally referred to as the US dollar), which leads to the automatic increase of the central parity of the RMB against the US dollar (passive increase), so that the purchasing power of the RMB weakens and depreciates. The following is an analysis of how the devaluation of the RMB will affect daily life (damage or benefit) from the perspective of our common people (individuals or individuals relative to the collective). The devaluation of the RMB will damage the interests of the following categories of people (industries):

(1) Stockholders in the stock market. In fact, most of the movements of the RMB and A- shares are highly correlated. If the yuan depreciates, many people will consider converting their money into dollars, which could lead to a rapid decline in A shares. This is because the devaluation of the RMB will lead to a decline in the valuation of local currency assets, leading to the weakening of the relevant sectors of the financial industry (including real estate), so as to drag down the overall market and damage to shareholders. On the other hand, once the expectation of RMB depreciation is formed, it will lead to the outflow of hot money, and the capital market where A shares are located will tighten rapidly, resulting in damage to investors. Third, if the RMB depreciates sharply, it may cause foreign financing enterprises to bear a heavier financial burden, thus reducing the valuation of the relevant stocks and thus "cutting meat" for sale.

(2), outbound family (travel abroad or students). For students who go abroad to play or study in the United States, it means that the same RMB will be exchanged for much less US dollars than before, which will cause a shortage of funds for those who go abroad. For this group of people, can take the first purchase of foreign exchange, that is, consider before going abroad to exchange all the required cash (US dollars). You can also bring several credit cards (UnionPay, VISA and MasterCard) for use, because many people like to use credit cards when traveling abroad. If the RMB is depreciating, it is relatively cost-effective to use credit cards settled in US dollars, but deferred repayment can still pay less. With a credit card settled in RMB, more interest will be paid if the RMB continues to depreciate.

(3), China Haitao. In recent years, the overseas purchasing agency market has been extremely hot. The prices of goods purchased from overseas overseas are generally about 1/3 cheaper than those purchased at domestic counters, and some can even be half cheaper. This is also the reason why many Haitao people are far away. However, if the RMB depreciates, many Haitao people will "lose money". For example, if you buy a commodity worth 100 US dollars (equivalent to about 680.18 yuan) from overseas, if the RMB depreciates by 50% (exaggeration, easy to understand), you need to pay 1360.36 yuan to buy it. This is like the original 3 yuan a kilo of cabbage, after the devaluation of the yuan to pay 6 yuan to buy, is obviously disadvantageous. Of course, at this time for foreigners, panning Chinese products will be beneficial.

The following analysis, if the devaluation of the RMB will affect individuals from the overall situation:

We all know that the advantages and disadvantages are relative. If it is good for some people, it will be bad for others. This is just like import and export enterprises. The devaluation of RMB is beneficial to export enterprises, which at the same time inhibits the development of import enterprises. At the same time, it will benefit the export enterprises to the employees engaged in the export industry, such as double wages; of course, when the import enterprises are restrained, the employees working in the import enterprises will face difficulties in life. Of course, the devaluation of the renminbi, according to the meaning of "money is worthless", sounds like a bad thing, just like it costs 3 yuan to buy a kilo of cabbage in the vegetable market, and it costs 6 yuan to buy it after the devaluation. If it is an ordinary farmer in China, his income can only live on planting, and there is little land, which will cause the phenomenon of "not enough to eat. Of course, the state has taken into account this situation. For such people, the state has adopted "subsidies" to make our lives more enjoyable.

(1) The devaluation of the RMB will benefit the following categories of people (industries) or those engaged in the following export industries:

a. textile and apparel. The devaluation of the RMB will give many domestic export-oriented enterprises a respite. Among these export-oriented enterprises, textile and garment enterprises undoubtedly occupy a considerable proportion. For many textile and garment enterprises whose profits are swallowed up by the foreign exchange settlement link, the devaluation of RMB will be one of the most direct means to stimulate their performance growth.

B. steel industry. Steel going out is an effective way to increase the profits of steel enterprises, especially in the case of RMB devaluation, which undoubtedly enhances the competitiveness of relevant steel enterprises.

c. shipping industry. The devaluation of the RMB may stimulate the export of domestic textile industry and other industries, thus bringing certain benefits to container shipping, thus stimulating the demand for raw materials to drive the air cargo market.

d. procurement industry. The devaluation of the renminbi will increase the procurement costs of importing companies, but it may be good for export-oriented chemical companies.

e. automotive industry. The depreciation of the RMB may make the price of imported cars less attractive, thus inhibiting the further expansion of imported car sales.

(2) The depreciation of the RMB will have an impact on investors (e. g. spot, futures, foreign exchange, etc.).

a. The depreciation of the RMB is reflected in the exchange rate of the US dollar, which directly affects the fluctuation of the silver price under certain circumstances. Generally in the spot silver market, the dollar rises (RMB depreciation) and the price of silver falls, while the dollar falls (RMB appreciation) and the price of silver rises. Spot investment can be bought up and down. If the RMB depreciates, people who buy in the right direction may get rich overnight. If the direction is reversed, they may lose everything.

B. The strength of the U.S. dollar (devaluation of the renminbi) generally represents a good domestic economic situation in the United States. Domestic stocks and bonds in the United States will be sought after by investors, and the function of spot silver as a store of value will be weakened; while the decline in the U.S. dollar exchange rate is often related to inflation, The stock market downturn is related, and the value preservation function of spot silver is once again reflected. This is because the depreciation of the US dollar is often related to inflation, while the high value content of spot silver tends to stimulate a rise in the value of spot silver and speculative demand when the US dollar depreciates and inflation increases. Silver is weak when the dollar is strong; silver is weak when the dollar is strong.

c. Futures are not primarily goods, but can be reflected through trade. There is a correlation between the depreciation of the RMB and the deterioration of the terms of trade, and the empirical evidence shows that the expansion of the export volume exacerbates the deterioration of the terms of trade.

d. Impact of RMB depreciation on foreign exchange traders.

Since foreign exchange is a bilateral transaction, traders can either buy a currency pair contract as the beginning of the transaction, or sell a currency pair as the beginning of the transaction, and the same can also buy or sell a currency pair as the end of the transaction. Whether it goes up or down, it is possible to make a profit. This means that if the renminbi depreciates, people who buy in the right direction may get rich overnight, and if the direction is reversed, they may lose their money.

(3) Other effects of the devaluation of the RMB.

All along, a large number of foreign investment in China for a long time to make a lot of money in China. Someone once said such a joke: An American went to China to eat and drink, and when he left, he exchanged the rest of the money for US dollars. One year later, he wanted to eat and drink for nothing in China. The devaluation of the RMB will theoretically bring a large amount of US dollars into China and exchange them for RMB assets to avoid the relative depreciation of the US dollar. These dollars enter and exist in the form of certain assets. Most of them are buying property. One of the reasons for the surge in house prices over the past few years is the continued depreciation of the renminbi. In this process of devaluation, people who own real estate, assets appreciate rapidly, but this is not necessarily a good thing. This is because, if the RMB depreciates, some investors are worried that assets will be withdrawn from real estate, especially those funds that have poured into the country from overseas in the early days, will flow out of China due to the devaluation of the RMB, or they will not dare to enter the Chinese market easily, which will help push the price of domestic housing assets down again.

　　What exactly is the 5. onshore RMB and offshore RMB?

Many people will be confused by the onshore RMB exchange rate and the offshore RMB exchange rate. The exchange rate is the exchange rate. How can there be a distinction between onshore and offshore?

Geographically, the difference between onshore and offshore exchange rates lies in the difference between mainland China and outside mainland China. The onshore exchange rate refers to the exchange rate for foreign exchange in mainland China, and the offshore exchange rate refers to the exchange rate for foreign exchange outside mainland China.

We usually say that the exchange of foreign currency is usually done in banks in mainland China, so the exchange rate used is based on the onshore exchange rate as the exchange standard.

If a more official explanation is needed.

Onshore exchange rate: that is, the central bank authorizes the China Foreign Exchange Center to announce the central parity of the exchange rate of RMB against US dollars, euros, Japanese yen and Hong Kong dollars on the morning of each working day as the reference price for the exchange rate of the inter-bank spot foreign exchange market and bank counter transactions on the same day, which is called the onshore RMB.

Offshore exchange rate: The exchange rate at which the central bank opens up RMB transactions in Hong Kong and other countries is called offshore RMB, while the RMB offshore transaction (CNH) implemented in Hong Kong, China in 2010 already refers to overseas offshore RMB transactions.

The same is the exchange of RMB for foreign currencies, why should there be an onshore exchange rate and an offshore exchange rate? This is because the RMB has not been fully internationalized, which results in the difference between the onshore and offshore exchange rates of the RMB.

1, domestic exchange and foreign exchange, the price difference between the two markets is large, mainly because of the difference in price formation mechanism.

2, the offshore RMB exchange rate, because more inclined to market-oriented, relatively less regulated, so more volatile.

3, the onshore RMB exchange rate, will be affected by the central mother, especially when the market risk, the central bank will maintain the stability of foreign exchange and make some currency market adjustments.

The offshore exchange rate and the onshore exchange rate will affect each other, the offshore exchange rate more reflects the market situation, the onshore exchange rate reflects the attitude of the central mother.

At the end of 2016, the RMB plummeted against the US dollar, and many people thought the exchange rate was about to break 7. However, seeing the strength of the onshore exchange rate, the offshore RMB exchange rate soon began to rise again.

Because the onshore and offshore exchange rates are not the same, there will be a difference, once the difference is too large, speculators can buy through the low exchange rate of one shore, through the high exchange rate of one shore, so as to sell arbitrage.

At the same time, a large amount of arbitrage will quickly reduce the difference between offshore and onshore exchange rates.

(Source: Tencent Finance Comprehensive)