Since the beginning of the month, this wave of rise in the exchange rate of the renminbi against the US dollar has caught foreign traders by surprise. On May 28, the offshore and onshore RMB against the U.S. dollar broke through the 6.35 and 6.37 barriers, respectively, refreshing the highest levels since May 2018. During the week from May 24 to May 28, the central parity of the RMB against the US dollar appreciated by 442 points, or 0.69%, which was the largest weekly appreciation in the past 20 weeks. On May 31, the central parity of the renminbi against the U.S. dollar was raised for a "five consecutive rises" and hit a three-year high. In the foreign exchange market, the offshore and onshore RMB exchange rates against the US dollar both rose above 6.36 yuan in intraday trading, and the appreciation momentum remains strong.

In May, the renminbi closed up 1.74%, rising in value for two consecutive months and recording the largest monthly increase in six months. In two months, the onshore renminbi exchange rate rose from 6.57 yuan in early April to 6.36 yuan, an appreciation rate of 3.3%; during the same period, the offshore renminbi exchange rate rose from 6.58 yuan to 6.35 yuan, an appreciation rate of 3.62%.
The export company cried out, which is equivalent to eating up about 3% of the profits in two months without doing anything.
On May 31, the People's Bank of China decided to increase the foreign exchange deposit reserve ratio of financial institutions by 2 percentage points to 7% from June 15, 2021.
The central bank has adjusted the foreign exchange deposit reserve ratio three times in its history. The last time this tool was used was in May 2007. This was the first time the central bank used the tool in 14 years. In addition, in the past, the central bank adjusted the RMB deposit reserve ratio generally by 0.5 percentage points each time. The increase in the foreign exchange deposit reserve ratio was 2 percentage points, which was significantly larger than the previous adjustment of the RMB deposit reserve ratio. determination.

This will help ease the pressure on the RMB to appreciate too quickly. This policy adjustment sends two signals: First, the central bank will not allow the RMB to appreciate too quickly, and will act decisively when necessary. Second, if the central bank does not make a move, it must be a heavy blow. In the past, the central bank adjusted the RMB deposit reserve ratio by 0.5 percentage points each time. The increase in the foreign exchange deposit reserve ratio was 2 percentage points, which was significantly larger than the previous adjustment of the RMB deposit reserve ratio. The intensity was greater, demonstrating the central bank’s determination to regulate and control.