Here is the translation of the provided text into English: "Seven trillion yuan is about to flow back to China, and the yuan exchange rate will have a significant appreciation space of 10%.

What does this mean for China's and the world's economy?

In the past month, the yuan, along with the yen, has become the strongest currency globally.

The yuan-to-US dollar exchange rate has appreciated from close to 7.3 to breaking through 7.1 in one breath.

The rapid appreciation of the yuan, next to the yen's appreciation, is due to the Bank of Japan's interest rate hike and the Japanese government's active intervention in the foreign exchange market, trying to burst the short positions that had been betting against the yen.

But why is the yuan appreciating?

We have not intervened in the foreign exchange market as strongly as Japan, and the People's Bank of China has even just cut interest rates, yet the yuan is stronger than the US dollar.

The reason behind this is that in the past few days, Wall Street capital has issued a "strong bullish signal on the yuan."

Analysts have found that in just a few years since the pandemic, China has accumulated more than two trillion US dollars in overseas assets.

With the US dollar's interest rate cut imminent, this part of the assets is about to flow back to China.

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You may have heard of the "US dollar tide."

Such a large-scale capital flow can be called the "yuan tide."

The recent change in yen capital flows has already caused a global market shock.

This time, once the "yuan tide" forms, what kind of shock will it bring to the global financial market?

And for our domestic investors, what kind of opportunities will this change in capital flows bring us?

If you care about this topic, you might as well follow first and listen to Bai Nian give you a good talk~ One, Wall Street giants are bullish on the yuan.

The leader of this round of bullish yuan is led by Wall Street hedge fund manager and former Morgan Stanley currency research director Ren Yongli (Stephen Jen).

He also has a more famous title - the founder of the "US dollar smile theory."

The "US dollar smile theory" believes that the US dollar exchange rate usually rises when the US economy is very strong or very weak.

And when the US economy is neither strong nor weak, it usually falls.

Just like a smile curve.

Of course, this theory is not the focus of our day.

The focus is that Ren Yongli's recent research found that Chinese enterprises and residents have accumulated more than two trillion US dollars in overseas assets in the past few years since the pandemic.

With the US dollar's interest rate cut and the decline in overseas asset returns, nearly half, that is, one trillion US dollars of assets, may flow back to China, bringing a huge appreciation space for the yuan.

It will also change the logic of global assets.

He believes that this time the appreciation of the yuan may reach 5% to 10% - and this is still under the constraint of the Chinese government, because excessive appreciation of the yuan is not good for our exports.

If the official does not constrain, the appreciation of the yuan may be greater.

Seeing this, I believe you must have a lot of questions in your mind.

The first question: Does China have so many overseas assets?

The second question: Even if there are so many assets, will these assets really return to the country after the US dollar interest rate cut?

Let's answer one by one.

Two, the origin of "overseas China."

The first question, does China have so many overseas assets?

Yes, and the scale is much larger than you think.

People who care about finance should have heard of such a term - "overseas Japan."

It refers to the huge overseas assets accumulated by Japan during the industrial upgrading and large export surplus in the 1980s and 1990s.

This asset has become an important source for Japan to support domestic economy and yen value today.

But in fact, "overseas China" is even larger than "overseas Japan."

Let's look at the data.

From the perspective of trade surplus, in just three or four years, China's trade surplus has expanded rapidly.

The commodity trade surplus, from the annual 40 billion US dollars before the pandemic in 2019, expanded to 80 billion US dollars in 2023.

From January to July 2024, China's commodity trade surplus increased by 8% year-on-year, and this year may break through 90 billion US dollars.

How did China get such a large commodity trade surplus?

Thanks to two factors, industrial upgrading and energy independence.

In terms of industrial upgrading, in the past few years, we have seen significant progress in China's automobile, semiconductor, and new energy industries.

Our automobile exports were only 15 billion US dollars in 2019, and this year may break through 120 billion US dollars.

Automobile imports were 48 billion US dollars in 2019, and this year may be less than 45 billion US dollars.

And our integrated circuit exports were 100 billion US dollars in 2019, and this year may break through 150 billion US dollars.

Battery exports were 16 billion US dollars in 2019, and this year should exceed 60 billion US dollars.

And so on.

In terms of energy independence, in addition to integrated circuit imports, oil imports have always been China's second-largest trade deficit source.

But thanks to the promotion of new energy policies, starting from the second quarter of 2024, even excluding the interference of the pandemic on travel and oil use, China's oil imports still showed a long-term downward trend.

In addition, we should also pay attention to the reduction of China's service trade deficit.

Unlike our strong manufacturing industry, our service industry is relatively weak internationally.

Before 2019, our country lost more than 25 billion US dollars a year due to service trade deficit.

For example, tourism has always been that more Chinese people go abroad to play, and fewer foreigners come to play.

Studying abroad is also the same.

In addition, there are cultural products, which have always been Hollywood blockbusters in China, and China can export fewer cultural products.

But in recent years, we have seen a reversal of this situation.

Thanks to the cultural confidence of Chinese people, the demystification of foreign countries, and the deterioration of the security environment in Europe and America, we have fewer people going abroad for tourism and studying.

Even more than a year after the end of the epidemic, the relevant data has not returned to the peak before the epidemic.

In terms of cultural products, we can also see that Hollywood blockbusters are not selling in China, while Chinese games have been sold all over the world.

Under the influence of these factors, from January to July 2024, China's service trade deficit decreased by 8% compared with the same period in 2019.

Three, the yuan carry trade.

The expansion of commodity trade surplus and the reduction of service trade deficit.

Under the influence of these factors, China's foreign trade enterprises are like a super large "gold-swallowing beast," earning profits globally.

According to foreign trade data, since 2020, China has obtained a surplus of more than two trillion US dollars.

But on the other hand, enterprises earning US dollars does not necessarily mean that they will immediately become yuan.

According to the balance of payments account published by the State Administration of Foreign Exchange, since 2020, only 700 billion US dollars out of the above two trillion have been converted into yuan and remitted back to the country.

In 2023 and 2024, the related net inflow of yuan is only 50 billion US dollars.

This is because, since 2008, our country has already abolished the "mandatory exchange" system.

Coupled with the fact that we are currently facing the strongest US dollar interest rate hike cycle in nearly 20 years.

US dollar deposit interest rates are as high as 5%, much higher than yuan interest rates.

A considerable number of foreign trade enterprises have adopted the arbitrage model of "borrowing yuan and investing US dollars."

For example, the media recently reported a case.

Lai Ke Electric, a listed company that operates small home appliances, earned a net interest of 300 million yuan by investing in US dollars in 2023.

And when it needs money domestically, it goes to the Bank of China to borrow low-interest yuan loans.

By "high deposit and high loan" to obtain interest rate differences, playing a "divine operation."

Such arbitrage is definitely not only Lai Ke Electric, but almost all Chinese foreign trade enterprises do this.

This has led to the rapid expansion of the scale of Chinese enterprises' overseas assets in the past few years, and a huge "overseas China" has been formed.

However, as the US dollar enters the interest rate cut cycle, this arbitrage model is about to end, and even a complete reversal will occur.

This is because, from the perspective of domestic enterprises, as the US dollar begins to devalue, the investment returns priced in yuan are rapidly declining.

For example, in the past month, we have seen the yuan rapidly appreciate by 2%.

For these foreign trade enterprises that invest in US dollars, this is equivalent to a direct loss of 2%.

If the yuan appreciates another 1%, for example, breaking through the "7" threshold, investing in US dollars is no longer more profitable than investing in yuan.

If the US dollar depreciates further, it will even result in investment losses.

So for these enterprises, it is time to convert these US dollar assets into yuan and remit them back to the country to avoid exchange rate risks.

The more enterprises do this, the more intense the appreciation of the yuan, and the more obvious the tidal effect.

"Coincidentally," at this point when the US dollar is about to cut interest rates and a huge amount of overseas funds are about to return to the country, the Chinese government is also carrying out strong economic stimulus, intending to guide these funds back to the country.

In addition to fiscal stimulus consumption, the central bank has also taken significant actions recently.

At the end of August, the central bank issued a notice stating that it had net purchased 100 billion yuan of government bonds in the secondary market.

This is also the first time in history that the central bank has purchased government bonds in the open market.

Although our central bank's purchase of government bonds is not like the central banks of Europe and the United States, which engage in quantitative easing and have a strong "watering" meaning, the central bank's direct support for fiscal expansion also sends a strong economic stimulus signal.

However, seeing this, I believe there are still friends who will have doubts.

Will the US dollars held by Chinese enterprises never be remitted back to the country?

For example, many rich people want to immigrate, and these assets will be lost forever.

We must admit that there is definitely this phenomenon.

But compared with before the epidemic, the scale of China's immigration after the epidemic has not increased significantly.

According to the World Bank's statistics of countries' data, the number of Chinese immigrants abroad in 2022 and 2023 is about 300,000, which is not significantly expanded compared with 2019, and is far less than before the 2008 financial crisis."

Please note that the translation provided is a direct translation of the original text and may not include all the nuances or context that might be present in a full interpretation.Here is the translation of the provided text into English: So, contrary to what many people say, there is no situation where, after the pandemic, Chinese tycoons all fled in a rush, taking all their assets with them.

In comparison, since the pandemic, the scale of China's accumulation of overseas assets has been rapidly expanding.

Excluding a part where Chinese companies invest in overseas factories for normal business purposes, most of the funds are still aimed at speculative profits.

As soon as there is a fluctuation in the exchange rate between China and the US, the direction of these investments will change accordingly.

So at this point in time, we can confidently say that a huge "Renminbi Tide" is about to form, or has already formed.

IV.

Renminbi Tide, Shocking the World We can imagine that the fluctuation of the "Yen Tide" in early August once caused a massive shock in the international market.

What kind of shock will this rise of the "Renminbi Tide" bring to the international market?

Moreover, compared to the Yen Tide, the scale of the Renminbi Tide will only be larger.

This is because, although Japan once had deep operations and accumulation overseas, due to the interruption of Japan's industrial upgrading by the US in the past decade or so, and the inability to change its dependence on energy imports, Japan has had a trade deficit for three consecutive years.

A deficit means the consumption of foreign exchange, and the so-called "overseas Japan" is shrinking.

This is also why Japan, even with a large amount of overseas investment and profit inflow, cannot support the exchange rate of the yen.

In the past three years, the yen has depreciated by more than 30% and has been unable to resist the interest rate hikes and harvesting by the US dollar.

China is different.

Our industrial upgrading and energy independence are progressing smoothly, and our trade surplus is expanding year by year.

These surpluses, whether they flow back at the moment or not, will eventually flow back, forming the basis for the long-term appreciation of the Renminbi.

This also gives the People's Bank of China the confidence not to follow the interest rate hikes during the US dollar's interest rate hike cycle, while being able to resist the dollar's harvesting.

Moreover, with the US dollar's interest rate cut imminent, the situation between China and the US is reversing.

Chinese capital is flowing back from the global market, especially the US market, in large amounts, and the US market can feel this shock, shaking three times.

Therefore, the US has recently frequently dispatched financial working groups and Sullivan to visit China for negotiations, with financial communication and cooperation being a major issue.

In the past, we talked a lot about the dollar tide, but today, Wall Street has started to care about the Renminbi tide.

This means that in the global capital market, China is moving towards the central stage.

We must understand that behind this is the rise of our industrial status.

As long as there is a strong industrial base, China will always be invincible.

And with the rise of the Renminbi tide, this change in the flow of funds will bring what specific impacts and opportunities to the domestic capital market.