The current appreciation of the Renminbi (RMB) exchange rate is conducive to the recovery of market confidence. It is expected that for a period in the future, the RMB will generally maintain a moderate appreciation trend, but the extent of appreciation may be limited. It is essential to adhere to the decisive role of the market in the formation of the RMB exchange rate. As long as there are no significant fluctuations in the exchange rate, administrative interventions in the exchange rate should be avoided as much as possible. At the same time, continue to consolidate the foundation of economic recovery and promote the continuous stabilization of the RMB exchange rate, maintaining the basic stability of the RMB exchange rate at a reasonable and balanced level.

Firstly, the main reasons for the recent appreciation of the RMB exchange rate against the US dollar and future trends:

There are two main reasons for the appreciation of the RMB exchange rate against the US dollar. The first is from the perspective of the domestic economic fundamentals. The exchange rate of the RMB, like that of any country, is primarily determined by the economic fundamentals. The second is the interest rate differential and its trend of change. These are two very important reasons.

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From the perspective of domestic economic fundamentals, with the continuous implementation of stable growth policies, it is expected that the main economic indicators in China for the fourth quarter will be better than expected. As we all know, this year's economic growth has been better than expected, with a cumulative growth of 5.2% in the first three quarters. For the fourth quarter, I believe that under the continuous implementation of stable growth policies and the low base of last year, the main economic indicators will also be better than expected. The situation in the third and fourth quarters of last year is different from this year. The base for the third quarter last year was 3.9%, and the base for the fourth quarter was 2.9%, a difference of one percentage point. With the continuous implementation of policies to stabilize the economy, I believe that the economic growth for the whole year will basically exceed 5%, and I predict it will reach 5.2%. Because even if the fourth quarter and the third quarter are exactly the same at 4.9%, it can still exceed 5%, of course, unless there are special exceptions. This is my forecast for the whole year. In other words, the main economic indicators for the fourth quarter are better than expected. The exchange rate fundamentally depends on the economic fundamentals.

We also need to look at the interest rate differential between China and other countries and its trend of change. Most people only see the interest rate differential between China and other countries, but the trend of change is more important. The interest rate differential has already been reflected in the current exchange rate. A while ago, 7.3 was broken several times, and now the RMB has appreciated to around 7.14, 7.15. The key is the trend of change. At present, the interest rate differential between China and the US has entered a stable period, which is very important.

US inflation has eased, and employment is under pressure, with expectations for the Federal Reserve to raise interest rates slowing down. In October, the US CPI year-on-year growth rate was 3.2%, a significant drop of 0.5 percentage points from the previous month. In October, the number of non-farm employed people in the US was only 150,000 (usually around 200,000, with the highest reaching nearly 300,000), the lowest since February 2021, and the unemployment rate was 3.9%, 0.1 percentage points higher than the previous month. The Federal Reserve is also in a difficult position, as it needs to balance economic growth, unemployment rates, and inflation. Therefore, expectations for US interest rate hikes have slowed down.

China's central bank has always been cautious about interest rate cuts, using more quantitative tools, such as reducing reserve requirements and net injections in the open market to adjust total liquidity, and guiding the direction of capital allocation through structural monetary policy tools. Since 2016, our policy interest rates have only been adjusted 12 times, while the legal reserve requirement ratio has been adjusted 20 times, all of which were reductions. This is different from the United States; the number of reserve requirement reductions is far greater than the number of interest rate adjustments, which is in line with China's national conditions. In addition, we guide the direction of capital allocation through structural monetary policy tools. According to central bank data, the balance of structural monetary policy tools accounts for 17.2% of the central bank's total assets, which should be considered a high proportion. US monetary policy mainly has two goals: price stability and full employment. However, in China, almost all major economic and social activities require the cooperation of monetary policy, such as ensuring the delivery of buildings, supporting agriculture, rural areas, and farmers, and supporting high-quality economic development, all of which are related to structural monetary policy. The recent Central Economic Work Conference also mentioned that structural monetary policy tools should be used to support weak links in the economy and high-quality economic development. This is where China is different from other countries, and our analysis must be combined with China's reality. Overall, China has always been more cautious about interest rate cuts.

Therefore, the interest rate differential between China and the US has now entered a relatively stable period. It is unlikely that the US will significantly raise interest rates, and China will not continue to lower interest rates. This is why I believe that the interest rate differential between China and the US will not narrow quickly, and the RMB exchange rate will remain stable.

Secondly, the moderate appreciation of the RMB has a positive impact on China's economy.

The moderate appreciation of the RMB exchange rate will improve market expectations and restore market confidence. The rebound of the RMB exchange rate is a manifestation of the bottoming out and rebound of China's economy. From a psychological perspective, the appreciation of the RMB and the recovery of market confidence are expected to form a virtuous cycle. When market confidence is good and recovering, the RMB exchange rate will also rise. On the other hand, the rise in the RMB exchange rate will also enhance people's confidence. We should not look at the RMB exchange rate solely from an economic perspective. I think we should look at it from political, economic, and social aspects. Ordinary people cannot think so much; they think that if the RMB exchange rate is stable, it indicates that the economy is stabilizing.The appreciation of the Renminbi exchange rate also reflects the international market's high recognition of China's economic recovery and stimulates the confidence of international investors in our market, which is also conducive to attracting long-term capital inflows.

The moderate appreciation of the exchange rate is generally more beneficial than detrimental to the foreign trade sector. The appreciation of the Renminbi reduces the actual value of imported goods, which is conducive to promoting domestic demand. In October, the total import volume increased by 3% year-on-year, a significant increase of 9.2 percentage points from the previous month, indicating an improvement in domestic investment and consumption demand. As China's economy transforms and upgrades, and high-end manufacturing industry develops, the negative impact of exchange rate appreciation on exports is continuously decreasing. Although exchange rate appreciation may be unfavorable for exports, for our high-end manufacturing industry, the bargaining chips may be on our side. Therefore, exchange rate appreciation may not necessarily be a bad thing, and it has a positive significance for enterprises. I often lecture in MBA and EMBA classes, and I have asked many entrepreneurs who hope that the exchange rate remains basically stable, so they can focus on their work. Otherwise, export and import enterprises will have to consider the exchange rate. Maintaining a basically stable exchange rate is beneficial for both export and import enterprises, allowing them to focus on production and operation without spending too much energy on judging exchange rate trends. If the exchange rate fluctuates greatly, enterprises will engage in exchange rate arbitrage, which is not good. A basically stable exchange rate, even with a slight appreciation, is beneficial.

Third, adhere to the market's decisive role in the formation of the Renminbi exchange rate.

This is the key point - adhering to the market's decisive role in the formation of the Renminbi exchange rate is very important. Some time ago, the Renminbi exchange rate was under pressure, and to some extent, the market's one-sided, pro-cyclical behavior led to an over-adjustment of the exchange rate, of course, there are also many economic and social factors. Recently, the appreciation of the Renminbi against the US dollar is the market's correction of the over-adjustment of the exchange rate. I think this is market behavior. I particularly emphasize that over the past month, the appreciation of the Renminbi is market behavior.

The moderate appreciation of the Renminbi has a generally positive impact on China's economy and society, which is very important. We should adhere to the market's decisive role in the formation of the Renminbi exchange rate, and as long as the exchange rate does not fluctuate greatly, we should avoid intervening in the exchange rate through administrative means. I think we currently do not need to intervene in the exchange rate. Let's think about it, when the Renminbi exchange rate depreciated some time ago, it broke through 7.3 many times, but we basically did not have a big intervention. Now it has appreciated, and my judgment is that it may continue to appreciate slowly and stably, but it is impossible to appreciate greatly. What should we do? What should our monetary authorities do? I think we should also adhere to the market's decisive role in the formation of the Renminbi exchange rate, and we should not greatly intervene in it, which is my personal view. We often say that the fluctuation range of the exchange rate has expanded, and it has expanded, not much, up or down, not much. So the main point of my speech today is "as long as the exchange rate does not fluctuate greatly, we should try to avoid intervening in the exchange rate through administrative means." China's exchange rate marketization reform has been continuously advancing, and I will not elaborate in detail. Although there are fluctuations, our intervention is becoming less and less, so we should still adhere to the market's decisive role in the formation of the Renminbi exchange rate, and as long as the exchange rate does not fluctuate greatly, we should avoid intervening in the exchange rate through administrative means.

Finally, in summary.

At present, the appreciation of the Renminbi is conducive to the recovery of market confidence. Everyone present here is engaged in the economy and may only consider from the economic level, but for the 1.4 billion people in China, it is not only like this. We cannot only stand on our own position. It is expected that in the next period, the Renminbi will generally maintain a moderate appreciation trend, but the appreciation range may be limited. We should adhere to the market's decisive role in the formation of the Renminbi exchange rate, continue to consolidate the foundation of economic recovery, promote the continuous stabilization of the Renminbi exchange rate, and maintain the Renminbi exchange rate basically stable within a reasonable and balanced level. I may not be right, just for your reference.