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Up to now, the exchange rate of RMB against the US dollar has fallen to 7.15. Compared with 6.3 in March 2022, the RMB has depreciated by nearly 10%. This is the third time since August 2019 that it has broken 7.

Another problem is that the central bank of China has adopted an independent monetary policy with the increase of US dollar interest rates. Since this year, the Central Bank of China has successively reduced interest rates three times, which can be said to be contrary to the monetary policy adopted by the United States.

The key point is that the RMB exchange rate breaking 7 is a psychological barrier for everyone. Since the RMB has broken 7, is it still far from 8? People have formed an expectation that the RMB will continue to depreciate, which will further accelerate the depreciation of the RMB.

Today, let me first say, will the RMB break 8 under the strong interest rate increase of the US dollar?

I want to talk about this from the following aspects.

First of all, the last time the RMB exchange rate broke 8 was in May 2006, which was the last time it broke 8 for 13 consecutive years since 1994. After that, the RMB began to appreciate all the way, reaching 6.3 at the beginning of this year. The ultimate reason is that after China's accession to the WTO, its ability to earn foreign exchange has become stronger and its economic volume has become larger.

In 2006, China's trade surplus was US $177.47 billion, while in 2021 it reached US $676.43 billion, the highest since records began in 1950. China's foreign exchange reserves also rose from US $1.07 trillion in 2006 to US $3.12 trillion at the end of May 2022, more than three times that of 2006, and more than twice that of Japan, which has been ranking first in the world for 17 consecutive years.

In addition, China's economic volume has also increased from 21.94 trillion yuan in 2006 to 114 trillion yuan in 2021, becoming the second largest economy in the world.

As we all know, a country's huge economic volume and abundant foreign exchange reserves can balance its currency exchange rate. We can understand this by looking at the recent depreciation rates of other currencies.

Now the exchange rate of Euro against USD has broken through the 0.99 threshold for the first time in 20 years; The pound also hit its lowest level against the dollar since 1985; The exchange rate of the Japanese yen against the US dollar was also the lowest since August 1998; The exchange rate of the Korean won against the US dollar also fell below the 1400:1 mark, the lowest since 2009; The exchange rate of Türkiye lira against the US dollar fell below the 18:1 mark, depreciating by about 26%; The Indian rupee and Vietnamese dong both fell to new historical lows.

The RMB only fell below 7:1, and the last time the RMB broke below 7 was only in September 2019. It can be seen that the depreciation of RMB against other currencies is already very small.

Therefore, from this point of view, even if the US dollar blindly and forcefully increases interest rates, and the RMB is really about to break 8, we will have more means and policies to curb it.

Secondly, if the RMB exchange rate really wants to return to the era of breaking 8 in 2006, it means that the RMB will depreciate by 14% on the existing basis. First of all, this phenomenon has not occurred since 2006. Moreover, if the RMB depreciates by 14%, the depreciation of other currencies will be even greater.

Let's take the yen as an example. If the yuan breaks 8, the yen will depreciate by more than 50%. Since September 2021 to September 2022, the yen has depreciated by 32% against the US dollar. This means that Laomei will be able to purchase Japanese high-quality assets at half the price. Secondly, there are Korean currency, rupee and Türkiye lira, which will be terrible.

If Lao Mei really wants to cut leeks with a sickle, you can imagine what will happen then? That is, the global de dollarization will be faster and faster. How dare Lao Mei do this?

Therefore, from the perspective of global economic development, I am afraid that the whole world will not allow the RMB to break 8.

Moreover, the last crazy interest rate increase in the US dollar was from June 2004 to July 2006. During this period, the US dollar raised interest rates by 425 basis points in total. When the US dollar interest rate increase ended, the RMB appreciated from 8 points to 7.97 against the US dollar, which also means that the RMB has appreciated after the US dollar interest rate increase. This mainly depends on the take-off and development of China's economy.

In addition, the US dollar has increased by 225 basis points from March to July this year. Even if the US dollar raises interest rates again, it is unlikely to increase to 425 basis points. If we continue to raise interest rates without a bottom line, first of all, the real economy and stock market of the United States will collapse, and the United States will not do so. Of course, the RMB cannot break 8.

Therefore, whether it is in the interests of the United States, or from the perspective of the global economy, combined with the hard power of China's economy, short-term fluctuations of the RMB may occur in the future, but breaking the 8 is absolutely impossible.

Then let's talk about another question: will RMB devaluation and house prices rise?

First of all, the devaluation of RMB is divided into external devaluation and internal devaluation. This devaluation of the RMB is due to the increase in interest rates of the US dollar and the devaluation of the RMB caused by the outflow of the US dollar, which is different from that of the RMB. Therefore, there is no inevitable correlation between exchange rate decline and house price rise.

Just as in a certain period, the RMB depreciated internally and appreciated externally, when house prices rose sharply, the exchange rate also appreciated. Therefore, there is no certain correlation between the two, and they will only have the opposite trend under specific circumstances. Therefore, whether the house price will rise depends mainly on the demand of the whole market and the promotion of policies, not on the fluctuation of the RMB exchange rate.

With regard to the future trend of house prices, the country is still pursuing a policy of maintaining stability. Since this year, the central bank has cut interest rates for three times, and the benchmark interest rate in the property market has also hit a new low in the past 20 years. These policies are good for the property market. At present, for the downward pressure on the real estate market, the country's policy easing can be said to be the largest since 2016.

On the issue of RMB exchange rate, the last thing I want to say is that as long as China's real economy has a strong foundation, it will form a huge attraction for foreign capital, and will not cause large-scale withdrawal of foreign capital because of the appreciation of the U.S. dollar. Even if the U.S. dollar raises interest rates again, it will not affect the core value of RMB.