01, The Chinese Yuan Continues to Appreciate

After the Chinese Yuan exchange rate surged by more than 1,500 points last Friday, although it started the week on Monday with a gap down, it continued to rise thereafter.

The exchange rate of the US dollar to the Chinese Yuan reached its lowest at 7.2469, but it has currently risen to 7.2235.

02, Trade Surplus Expands

It is anticipated that the Chinese Yuan will continue to rise amidst fluctuations, especially today when the General Administration of Customs released the latest foreign trade data, showing that our trade surplus has further expanded, which will strongly promote the appreciation of the Chinese Yuan.

As of the end of October this year, our foreign trade grew nearly 10% year-on-year, with exports continuing to grow significantly, increasing by 13% compared to the same period last year. Imports also saw a slight increase, but the growth was smaller, only at 5.2%.

However, the most pleasing development without a doubt is the further expansion of the surplus. Exports for the first 10 months reached 19.71 trillion yuan, while imports were 14.91 trillion yuan, resulting in a surplus of 4.8 trillion yuan.

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When we review the data for the first 9 months, we find that the surplus at that time was 4.23 trillion yuan. This means that the surplus amount increased by nearly 0.6 trillion yuan.

Due to the continuous interest rate hikes in the United States, the threat of inflation looms over the global economy. This year, the global economy has been maintaining a slow growth state, and the trend of contraction is quite evident.

The latest global manufacturing PMI decreased by 0.9 percentage points compared to last month, falling below 50 for the first time after a continuous decline over five months. The current PMI stands at 49.4.It can be anticipated that the pressure of future economic contraction will continue to increase.

In this context, China's low inflation environment has allowed the economic recovery to continuously improve various economic indicators, which is why there has been rapid growth in trade and an expanding trade surplus.

03, Continuous Improvement

Additionally, from the foreign trade data published by the General Administration of Customs, we can also observe some encouraging trends.

The United States is now only our third-largest trading partner, having been surpassed by ASEAN and the European Union. This change is beneficial in reducing our dependence on the American market.

For a period after China's accession to the WTO, our country's trade growth was relatively fast, but most of the trade was between China and the United States.

This also led to a situation where, during that period, although we had a high trade surplus, we accumulated a large amount of US dollars. However, the United States was unwilling to export high-end technology products to China, which forced us to use the accumulated US dollars to purchase US Treasury bonds.

The period of rapid economic growth in our country coincided with the continuous increase in the holdings of US debt in foreign exchange reserves.

By 2013, our holdings of US Treasury bonds had even exceeded 1.3 trillion US dollars.

In recent years, US Treasury bonds have gradually lost their original creditworthiness. Central banks around the world have been selling them off, and our country has also been selling a large amount of US Treasury bonds.Nowadays, trade growth with ASEAN and the EU is faster, and the total amount has also exceeded that of the United States, which has made our foreign trade income more diversified, avoiding being tied to one tree.

In addition, there are also gratifying changes in the industrial structure.

So far this year, the export volume growth rate of some traditional industries remains high, such as luggage, shoes, and hats, with an export growth rate exceeding 20%; on the other hand, the export growth of high-tech products is even faster, with the export of electric vehicles doubling and new energy-related mechanical and electrical products increasing by more than 80%.

All these indicate that our country's industrial optimization and upgrading are continuously making progress.

Another piece of data shows that our country's private enterprises' foreign trade is also achieving gratifying growth, with the proportion already reaching more than 50%.

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There is also a favorable factor for the strengthening of the RMB exchange rate, which is that the magnitude of the United States' interest rate hikes will continue to decrease.

There are already rumors that the Reserve Bank of Australia will take the lead in turning its monetary policy.

It is expected that Australia will raise interest rates by 25 basis points again in December, but the interest rate hike cycle will end there. Moreover, by the third quarter of 2023, Australia will enter a period of interest rate cuts.

At the same time, experts from US banks also believe that the Federal Reserve will raise interest rates by 50 basis points in December this year, and next year it will reduce the magnitude of interest rate hikes to 25 basis points, and by December next year, the Federal Reserve will start to cut interest rates.These signals indicate that the US Dollar Index will decline from its high levels in the future, and the Chinese Yuan will continue to strengthen in the medium to long term. Not only is there the factor of the weakening US Dollar, but also the economic strength of China as a foundation, no wonder foreign capital keeps buying Chinese assets.