The official RMB exchange rate against the U.S. dollar fell for three consecutive trading days. The median price fell to the nearest threshold of 6.7 yuan yesterday, to 6.6986, down 74 basis points from the previous trading day, setting a new low in recent months.

The Ministry of Industry and Information Technology officials said yesterday that the appreciation of the renminbi will affect corporate orders, and the number of fixed-length orders at the Canton Fair has significantly decreased.

Since the People's Bank of China announced an interest rate increase on October 19, the yuan has repeatedly weakened against the US dollar. Traders believe that the recent sharp fluctuations in the renminbi exchange rate show that the central bank hopes to form a two-way fluctuation in the exchange rate of the renminbi, breaking the market's expectation of a unilateral appreciation of the renminbi, thus curbing the inflow of short-term international capital (hot money).

Lu Zheng, senior economist, believes that the pace of RMB appreciation has slowed down significantly. This is mainly due to the strong rebound of the US dollar, the normal correction of the rapid appreciation of the RMB in the previous period, and the weakening expectations of the RMB appreciation after the rate hike. He believes that the dollar's rebound cannot be sustained and it is expected that the renminbi will regain its appreciation trend against the US dollar before the G20 summit.

The recent acceleration in the appreciation of the renminbi has affected the receipt of orders by export companies in the Mainland. Zhu Hongren, a spokesman for the Ministry of Industry and Information Technology, made special mention yesterday at the press conference in Beijing. The rapid appreciation of the renminbi has brought challenges to the operation of the industry.

6 percent of export companies indicate that the appreciation of 2 percent will be damaged

Zhu Hongren pointed out that since September, the cumulative appreciation of the renminbi against the U.S. dollar has risen by nearly two percentage points. Under the circumstances of large fluctuations in the exchange rate, companies have not dared to accept large orders and long orders, and production and operations have been greatly affected. According to the information available at the Canton Fair, the number of corporate fixed-term orders has decreased significantly. Faced with the pressure of appreciation, companies, entrepreneurs and employees are also worried.

A survey of 239 Chinese exporters in the Mainland indicated that more than 60% of export companies stated that a 2% or more appreciation of the renminbi against the US dollar would have a negative impact on exports.

In addition, the SAFE has recently stepped up its efforts to combat the influx of international "hot money." The SAFE announced yesterday that during the “hot money” campaign from February to the end of October this year, it had verified 197 cases of various types of foreign exchange violations, involving a total amount of US$7.34 billion.

The SAFE also informed that 9 foreign and domestic bank branches had irregularities in foreign exchange business, including the Hong Kong East Asia Bank's Guangzhou Branch. In February 2008, the branch handled a settlement of HK$11 million for a certain resident of Hong Kong for the purchase of non-residential houses, which violates the State’s requirement that individuals outside the country can purchase self-occupied housing in China for domestic needs.

SAFE: East Asia Guangzhou Branch involved in violation of regulations

In addition, the series of East Asian leaders’ meetings opened in Hanoi, Vietnam, and Premier Wen Jiabao of the State Council attended the meeting.

The analysis pointed out that under the global "currency war" haze, the RMB exchange rate will become the focus of discussion at the meeting. It is expected that the leaders of various countries may call on China to promote the appreciation of the renminbi in order to protect the economic development of Asian countries.

Comment: The appreciation of the renminbi has actually hurt the Chinese economy. In other words, the possibility of asking the government to make concessions has dropped to a low level. The recent rally in the US dollar and the mid-term elections in the US have settled, and the speculation on the appreciation of the renminbi Should be temporarily converged. Assuming these conditions are met, the future momentum of Hong Kong stocks will weaken.