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23

2023

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05

China’s Yuan Drops Through 7 Against the Dollar

Source:

OIG Research

With the breaking of the "7" threshold by the offshore renminbi (CNH) and onshore renminbi (CNY) against the US dollar on May 17th and 18th, the renminbi has reached a level below 7 for the first time in 2023. As of May 22nd, the central parity rate of the renminbi against the US dollar announced by the State Administration of Foreign Exchange is 701.57.

 

With the breaking of the "7" threshold by the offshore renminbi (CNH) and onshore renminbi (CNY) against the US dollar on May 17th and 18th, the renminbi has reached a level below 7 for the first time in 2023. As of May 22nd, the central parity rate of the renminbi against the US dollar announced by the State Administration of Foreign Exchange is 701.57.

 

Experts point out that the current exchange rate fluctuation reflects short-term market supply and demand dynamics. The smooth fluctuations before and after the exchange rate dropping through 7 indicate that China's foreign exchange market is resilient and capable of achieving self-balancing.

 

Regarding import trade, in the short term, currency depreciation may push up the prices of imported goods and overseas consumption costs, increasing the cost of living for residents. However, in the long term, a moderate depreciation of the renminbi helps promote industrial upgrading, improve corporate profitability and wage levels, which offsets some of the upward pressure on living costs and provides certain support for expanding domestic demand.

 

Undoubtedly, the depreciation of the renminbi against the US dollar will have an impact on various aspects of our economic life, particularly in terms of imports. It means that fewer US dollars can be obtained for the same amount of renminbi, leading to increased costs for importers of frozen goods and higher expenditure.

 

However, as the animal feed for domestic farming mostly comes from imports, the depreciation of the renminbi will also raise the prices of imported feed ingredients, further pushing up the prices of domestically produced meat. Therefore, the impact of exchange rate fluctuations on imported meat will exhibit a back-and-forth pattern.

 

It is worth noting that the relationship between changes in the renminbi exchange rate and international trade is not a simple linear one. As China's economy plays an increasingly important role in the global frozen food supply chain, businesses can successfully hedge against risks by adjusting their strategies and adapting to new market conditions in a timely manner. Overall, the slight depreciation of the renminbi has a dual effect on imported frozen products, and there is no need to be overly alarmed.