outlook on rmb exchange rate and internationalization
in 2023，china's economy is expected to be stable and improving，showing a divergence from the economic fundamentals of major overseas economies，providing fundamental support for the rmb exchange rate. the current account surplus will remain large and the financial opening will continue to attract international capital inflows，which contribute tothe balance of payments surplus trend. the rmb exchange rate has a solid foundation. the federal reserve's (fed) interest rate hike is slowing down，and the possibility of a rate cut within the year is not ruled out. the divergence in monetary policy between the us and china is over，which leaves more space for the rmb appreciation. the next five years are important for the orderly promotion of rmb internationalization. to advance the orderly internationalization of rmb，we are expected to pay more attention to financial security，adhere to a higher level of financial market opening，and optimize the management of cross-border capital flows.
china's economy is stable and improving，providing fundamental support for the rmb exchange rate
the economy is expected to rebound in 2023，and the annual growth rate is likely to remain above 5%，which is high among major economies. overall，china's economy will show a high forward and low backward trend，gradually recovering from the impact of the epidemic. at the beginning of the year，china's economy showed signs of improvement，with rmb loans surging 4.9 trillion yuan in january，a record high. the increase in the scale of social financing was 5.98 trillion yuan，the second highest in history. corporate medium- and long-term loans increased by 3.5 trillion yuan，an additional 1.4 trillion yuan year-on-year，which indicates the effect of the pro-growth measures and the improved corporate expectations. from the leading indicators，china's manufacturing purchase managers' index (pmi) ended three consecutive months of decline in january and returned to the expansion range，rising to 50.1.
by contrast，major economies such as the us and the european countries are more likely to fall into recession by 2023.the inflation in the us started to rise since the second quarter of 2021. the consumer price index’s (cpi) year-on-year growth rate reached 5% in may 2021 and remained above 5% for 21 consecutive months and above 6% for 16 consecutive months. in order to curb rising inflation，the fed has consistently raised interest rates sharply. the federal funds rate rose 450 basis points from 0.25% to 4.75%，as the fed dramatically raised interest rates. the effect of monetary policy generally has a lag effect，and the dampening effect of tight monetary policy on the economy will gradually emerge in 2023. the impact of the russia-ukraine conflict on europe compared to other regions will face the test of stagflation. in 2022，gdp growth slowed quarter by quarter，and cpi growth once exceeded double digits. the ecb's aggressive rate hike strategy will also have a serious impact on economic fundamentals. a recent annual survey of 101 leading uk economists conducted by the financial times showed that economists expect the uk to face the most severe recession in the g7. in addition，with the combination of slowing exports and high inflation，the probability of japan's economy falling into recession in 2023 is also rising.
