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A Glimpse into a Potential Influencing Factor of China’s Exchange Rate: Social Financing Scale

Weihao Li(School of Finance, Zhongnan University of Economics and Law)
Zekun Hong(School of Finance, Zhongnan University of Economics and Law)


The indicator of social financing scale (SFS) has become a new intermediate target for China’s socioeconomic regulation since 2011, which has a better tracking performance on important economic indicators such as CPI and is also the new intermediate target of monetary policy used by China’s central bank to replace M2 at present. So, is there an impact of the social financing scale on another important economic indicator, the RMB exchange rate? This paper conducted an OLS regression analysis of the time series data of social financing scale and the nominal effective exchange rate (NEER) of RMB for a total of 61 months from October 2016 to October 2021 and find that SFS has a significant positive impact on the exchange rate of RMB. This result means that the expansion of SFS will lead to the appreciation of RMB. In addition, the paper fills the research gap on the combination of SFS and RMB exchange rate, and suggests that mechanisms such as monetary policy or domestic interest rates may be responsible for this correlation at the theoretical level.


RMB exchange rate; Social financing scale; Intermediate target

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