RMB Forecast for 2020

The yuan, along with the dollar and the euro, has taken a strong position in the global currency market. And the forecast of the exchange rate is especially relevant against the background of a weakening US dollar: macroeconomic indicators of leading and developing countries during the period of active development of international trade depend on China’s future policy. What will happen to the renminbi in 2020 and what are the prospects for this currency?

RMB Forecast

Based on a comprehensive analysis of the political situation on the world market and taking into account the current growth rates of the Chinese economy, a forecast was made for the renminbi for 2020. For convenience, the data is consolidated in a special table.

Table 1 - the Dynamics of the renminbi (CNY) for 2020

Significance of China Currency

The People's Republic of China ranks 2nd in the world in terms of GDP. The state conducts an active trade policy with Russia, the USA, Japan, Canada, France and Germany. On the territory of the country - a huge number of multinational corporations, which once again emphasizes the importance of the "Celestial Empire" in the global economy. The exchange rate depends on the following factors:

• from the volume of exported goods. The Central Bank has a policy of weakening the national currency in order to increase the competitiveness of products on the world market (in particular, in the EU and Japan);
• from the US Fed policy. The currency of China is directly dependent on the US dollar (the process of "mutual devaluation" of national currencies). The increase in the interest rate that the US Government is trying to achieve is extremely disadvantageous for the PRC economy.

From October 1, 2016, the yuan was officially recognized as the IMF's sixth reserve currency and added to the SDR basket, which is used to finance the Fund's member countries. The Chinese currency today is on a par with the dollar, the euro, the Japanese yen, and the British pound. The yuan has deservedly acquired the status of an international exchange currency: many countries with developing economies are actively converting their dollar reserves into the currency of China.

Thus, experts from the People’s Bank of China in one of the official publications of the Economic Information Daily conducted a survey involving the foreign currency management reserves of the Central Bank of different countries (a total of 79 banks were involved with a share of foreign exchange reserves of 5.5 trillion dollars, i.e. 54% of the world level). Respondents suggested that by 2020, the share of the renminbi in international currency reserves could reach 6.9%.

As for relations between the Russian Federation and the AMG, at the end of 2018, the Bank of Russia converted part of its foreign exchange reserves from US dollars to Chinese currency: the share of USD fell by 24.4%, while the share of CNY, on the contrary, jumped from 5 to 14.7% . According to the First Deputy Prime Minister of the Russian Federation Anton Siluanov, Russian banks got the right to open correspondent accounts with Chinese banks. Russia has accumulated 35% of China’s world reserves, which opens up great prospects for this currency both in the Russian market and in the international arena.

Closed economy

In China, there are certain restrictions on the exchange of national Chinese currency for dollars, euros, rubles, etc. Withdrawing money from the "Celestial Empire" to foreign jurisdictions is not as easy as investors want. In China, a limit has been set for the transportation of currency in the amount of 50 thousand yuan per year (which at the current dollar / ruble exchange rate is 3.2 million rubles). As for jur.persons, the latter are entitled to exchange national currency only for the purpose of doing business and exclusively with the approval of the authorities. These factors impede China's liberalization. As soon as trade tensions between China and the United States decline, foreign investor confidence in CNY will increase and foreign capital will flow into the Celestial market.

Expert Forecasts

For China, the weakening of the national currency is the only chance to stimulate GDP growth in the future 2020-2021: in 2016, this indicator decreased by 0.04 percentage points. Despite a temporary decline, in 2017-2019. GDP growth was noted (at the level of 7-12%). In order to prevent a further slowdown in the economy of the PRC in 2020-2025, the process of increasing the renminbi will proceed very smoothly, without significant currency jumps.

Some experts, for example, strategist Jonas David from UBS Global Wealth Management, are convinced that the depreciation of the renminbi will stop at 7 CNY per USD, and by the end of 2019 it will reach 7.5 yuan per dollar. Goldman Sachs analysts raised their initial forecasts for 2020 to 6.7 yuan per dollar. HSBC financiers believe that by the beginning of 2020, the exchange rate will reach 6.95 monetary units (instead of the previously announced 7.1). According to currency strategist Mansur Mohiuddin of NatWest Markets, the US authorities will continue to apply sanctions and restrictions on the PRC in the form of import duties of up to 25% on goods from China in the amount of $ 200 billion. As a result, the following key factors will hinder the strengthening of the Chinese currency:

• slowdown in the Chinese economy;
• weakening of the country's trade balance due to US sanctions.

At the same time, most financial analysts agree that in 2020 the process of strengthening the yuan will continue against the background of a gradual increase in the national currency.

Read also:

• Russia's foreign economic policy until 2020
• Will there be a crisis in 2020 in Russia
• 2019-2020 world crisis: will there be

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