Mainstream opinions contributed the fast appreciation of RMB to several factors

Mainstream opinions contributed the fast appreciation of RMB to several factors, including the gradual recovery of China’s domestic economy, which re-attracted foreign capital, and the seasonal exchange settlement. Most foreign trade firms would increase exchange settlement in fourth quarter, according to an import-export trade company, who got receipts of its exported cotton yarn and clothing fabrics during high exchange settlement but still had to deal with the emerging requirements of exchange settlement caused by year end payment of goods and settlement of salary and bonus. And together with the relatively loose supply of USD in domestic exchange market, RMB was able to go up. Besides, China’s State Administration of Foreign Exchange prolonged exchange trading time to 3:00am helped in some extent prevent the short selling of RMB by foreign speculative capitals. A stabilized exchange rate lowered the requirement of risk control during the process of cotton yarn import and benefited operating profit lock-in.