Chief Economist of Dongwu Securities, Lu Zhe: Foreign capital is flowing back into RMB financial assets, and the RMB may enter a new round of appreciation cycle.

Jin10 data reported on November 4, Dongwu Securities Chief Economist Lu Zhe stated that the rebound in prices is crucial for economic growth and the capital market. A reasonable rebound has favorable conditions in three aspects: consumption demand, monetary liquidity, and exchange rate. From the perspective of consumption demand, long-term population transformation, industrial transformation, and fiscal transformation are all conducive to boosting residents' income. Moreover, the simultaneous movement of the population peak and consumption peak in the next decade indicates that the total consumption will be more optimistic. From the perspective of monetary liquidity, the Central Bank has initiated the buying and selling of government bonds, and the fiscal policy has started “debt conversion,” which is jointly promoting the transfer of fiscal deposits to residents and enterprises, thereby driving the M1 growth rate to significantly rebound in the past year. The rebound in M1 will lead to a rebound in PPI. From the perspective of the exchange rate, benefiting from a solid commodity export base, foreign capital returning to RMB financial assets, and the initial signs of a long-term weakening of the US dollar, the RMB may enter a new round of appreciation cycle.