I made some predictions on the long-term trend of the RMB exchange rate in the article "The Judgment of the Economic Situation in 2017" in late 2016.The contents of the original text are as follows: "Now, in the next one or two years, the RMB exchange rate will remain at around 7 to the U.S. dollar under some conditions. To achieve the goal, some supporting measures are indispensable, otherwise it will not work. That is the reason why I said 'Under some conditions'. From the perspective of China's economic growth in the next one or two years, it is appropriate to stay at this level of RMB exchange rate against the dollar. There were rare occasions where the exchange rate would have overshoot above 7 and up to 7.5 but it reverted to the mean. The reason for this is that the main supporting point is China itself as the GDP will grow at 6 or 7 percent in the near future. At the same time, the world economy is now entering into the stage of uncertain. By contrast, the RMB exchange rate now maintained at such a level, which is insufficient to the superior but is better to the inferior..... And the biggest problem in the future is the mechanism of the exchange rate for the RMB."

From the end of 2016 to now, I have not adjusted my forecasts and judgments that the RMB exchange rate will remain at around 7 to 7.5 against the U.S. dollar. Some of the factors that had been considered at the time but did not change significantly. The basic logic of analysis continued, so there was the reason why I didn't make adjustments.

The judgment factors included: robustness of US economic growth, prospects of trade wars, US presidential elections, deleveraging, reducing excess capacity, the downturn in China's economic growth, debt increase, capital outflows, "Belt and Road" and their impact, etc. The factors have successively published in articles, briefings, and research reports, all these are publicly available. There may be a difference in attention for those factors and the understood or not understood. ANBOUND is a think tank which focuses on policy influence rather than affects the public opinion. So, it is reasonable that someone can't know and understand it.

Now, the exchange rate between the RMB and the United States has reached 6.9, which is close to 7. that sparked a market panic. The Sharp divisions have emerged with market analysis. Some people believe that great fluctuations of the exchange rate against the US dollar may still exist that lead to the further depreciation pressure on the RMB. But in view of the limited reduction space upon the devaluation of the RMB, there is little possibility of the RMB to fell below 7 against the US dollar in near future..

It is worth mentioning that some institutions have recently lowered their forecasts for the RMB exchange rate against the US dollar during the year, but it is still rare to directly reduce it to below 7. Deutsche Bank has recently lowered its Renminbi-dollar exchange rate forecast from 6.8 Yuan to 6.95 Yuan, and it comes close to 7. It also indicate that this number have a particular means to the market. Of course, there are also experts who believe that the probability of the Renminbi-dollar exchange rate more than 7 is not big. As the saying goes "Just in case", they think we should be ready, in case of small probability eve turns up, Of course, many research institutions have now given up on the prediction and judgment of the RMB exchange rate.

Based on the current situation, my basic point is that even if the Sino-US trade war would be more intense in the future, the position of the RMB exchange rate reaching 7.5 although its extreme, it is impossible that the rate may fall more than 8 percent. Therefore, although the market is a little scared, I am very confident that 7 to 7.5 will be a clear dividing line. Both the government policy and the company's plan can use this exchange rate as the bottom line standard to predict economically.

Another question is whether the depreciation of the Renminbi is a hedge against the Sino-US trade war. That is, China keeps exchange rates down and ease the pressure on the US trade war.

Frankly speaking, I don't think that the Sino-US trade war can be alleviated either today or in the future. If the situation in China has not changed, I think the Sino-US trade war will still be roughly entangled in the next 10 years or so. Present China is like Japan in the past. The internal process of the US economy and society has changed very slowly. So, it has been forced to the outside. China is now a good target, and Japan has not yet been able to restore from the lost decade. Therefore, under this circumstance, the Sino-US trade war will continue. After President Trump, it will continue. There is no really good solution to both countries. It was a game of patience, resources and mutual growth. For China, the real unresolved issue is reform. In the past, it was said that reform and opening up obviously is outward and foreign merchants are satisfied. Future reforms should be introverted. We must change some real areas and make them more efficient making people are satisfied. For example, a first-tier city can see such a phenomenon. The economic development port has tens of billions or more of funds every year. The old-age and security can only get 10 billion Yuan a year, a difference of 10 times. This is the short board. Endogenous reform is what we should do. Times and circumstances have changed. Catering to foreign investors no longer works.

There are actually many problems in China. What is more needed that the Renminbi is stable and not devalued. There is no motive for China to let the Renminbi to depreciate. Instead, there is a motive for making the Renminbi Stable. Not only the "One Belt, One Road" foreign investment, but also China's large imports, such as grain, iron ore, oil, coal and other commodities. The rising strength of the Renminbi is better. China still has $775 billion-dollar debt in offshore. Depreciation means more money to pay, and there are serious challenges to capital outflows. Therefore, the depreciation of the RMB exchange rate is really not to hedge against the US trade war. it has such meaning, it is just an objective effect. Otherwise, the best strategy is hands-off, it's truth that Chinese banks still control the exchange rate.

Final Analysis Conclusion:

From the point of view of the relationship with other currencies, the depreciation of the Renminbi against the US dollar is, in fact, consistent with the devaluation rhythm of other emerging market countries against the US dollar. However, due to the Sino-US trade war and other reasons, the devaluation of the Renminbi is slightly more prominent. In the face of the strategic layout of the United States, such as the "US first" slogan, coupled with the US economic growth and capital inflows, there is no doubt that the US dollar is in a strong position than other countries' currencies, so the devaluation of the Renminbi is not special. In the future, along with the downward trend of China's economic growth, if there is no abnormal situation, it is a normal market reaction to stay between 7 to 7.5.