The process of RMB appreciation is changing the pattern of China's financial market. Before the reform of RMB exchange rate formation mechanism, finance was regarded as one of the areas most likely to benefit from appreciation. However, some people predict that under the background of overheating, the financial industry may also become a damaged industry under the dual influence of the sharp appreciation of the renminbi and the rapid increase of interest rates. Looking back 32 months after the exchange rate reform, both forecasts may become a part of reality. A fund manager of Huaan Fund Management Company said that in theory, the impact of RMB appreciation on the stock market is positive. But at present, the China stock market continues to fall, and this positive impact may take time to release. "The impact of RMB appreciation on the stock market is not on the capital side, but on investor confidence, specifically on the macro-economy and industry". One analyst believes that the appreciation of RMB affects the stock market more through its influence on listed companies. Listed companies with a large amount of foreign currency debts and those that need to import a large amount of foreign raw materials will gain opportunities because of the appreciation of RMB, which will have a greater negative impact on export-oriented enterprises, especially labor-intensive enterprises and listed companies with low added value of products, and affect their stock price performance in the medium and long term. The manager of the Asian Investment Department of a Korean financial holding group said that they plan to apply for an investment quota of US$ 50 million in China this year, and the company expects a minimum income of 7%. However, with the acceleration of RMB appreciation, the expected income has now increased. In addition, convertible bonds launched by some foreign banks can also enter the domestic stock market in the form of stocks. However, RMB appreciation may also increase stock market volatility. Zhao Qingming, senior manager of the research department of China Construction Bank, said that the accelerated appreciation of RMB may not necessarily lead to a smaller surplus. Even if it has an impact on the trade surplus, international capital projects will bring more capital inflows and the capital account surplus will be even greater. The accelerated appreciation of RMB will lead to the inflow of foreign exchange funds. Even attracting international speculative capital leads to the flow of speculative hot money, which affects the supply of stock market funds and the level of market interest rates, bringing huge fluctuations and hidden dangers to the market. The futures market faces short-term pressure. "The appreciation of RMB will suppress the price trend of China futures market," said Hu Kaixi, general manager of the industry department of Shanghai Intermediate Futures Co., Ltd. At present, the raw materials in the international market are basically denominated in US dollars, and the appreciation of RMB will bear the brunt of the impact on the commodity futures market. As far as the domestic futures market is concerned, most commodities need to import a large number of bulk raw materials, among which soybeans, copper, natural rubber and other varieties are highly dependent on imports. In 2008, China's inflation hovered at a high level. In the short to medium term, the biggest risk faced by China's economy is that the severe macro-control and the sharp slowdown of the external economy occur at the same time, which will put great pressure on the real economy and the capital market in the short term. A large amount of speculative capital arbitrage in the futures market has brought short-term pressure and even impact on China's domestic futures market. Cross-market arbitrage, the so-called "buy London, throw Shanghai" has also become the main operating method. This is particularly evident in copper futures varieties. Kathy said that the current pricing system of the international futures market is still the "8 yuan system" of the US dollar. Theoretically, if RMB appreciates by 5%, the ratio of domestic and foreign copper prices should drop by 5%. Due to the continuous appreciation of RMB, the copper price of London Metal Exchange is a bullish factor, which will inevitably lead to the situation that the copper price in London is lower than that in the domestic market. "Buy London and throw Shanghai" has also become an important tool for speculative forces to carry out risk-free arbitrage. Jing Chuan, chief researcher of Great Wall Ye Wei Futures Brokerage Co., Ltd. and deputy general manager of Shanghai Sales Department, said that at present, the comparison of domestic and international market prices shows that the domestic futures price rises behind the international market, and if it falls, the decline is greater than the international market. The bull market period of commodity market is from 200 1 to the present, and this period is also the process of continuous depreciation of the US dollar. Jingchuan said that although the appreciation of the RMB will not affect the long-term trend of the futures market caused by supply and demand, it will be troubled by the above situation before the RMB is completely decoupled from the US dollar. "Copper futures are undoubtedly greatly affected by appreciation. In addition, agricultural products (love stocks, prices, information) will also be implicated in some logistics conditions such as the Baltic index, which is greatly affected by the appreciation of the RMB during transportation. But gold denominated in dollars is the most affected variety. " Jingchuan said. Wang, chief analyst of Gaosaier Research Center, said: "The appreciation of the RMB is a medium-and long-term process, and the sharp appreciation of the RMB is often highly correlated with the sharp decline of the US dollar. We know that the seesaw relationship between the US dollar and gold often makes the appreciation of the renminbi only depress the increase of gold for a short time, but it has not changed the investment income of domestic gold investors from positive to negative. " Since the exchange rate reform, the appreciation of RMB has been mainly promoted at a slow pace. Under the background that the current depreciation of the US dollar, rising global demand for gold investment and inflation will still provide upward momentum for the gold bull market cycle, it is believed that it will only curb prices and will not subvert the upward momentum. Jingchuan believes that under the expectation of RMB appreciation, a large amount of funds entering China are active in the futures market. Once speculative funds enjoy the benefits of RMB appreciation, the selling of speculative forces will lead to a sharp shock in the domestic futures market price. Two weeks after the RMB exchange rate reform in July 2005, the central bank conducted a survey. The survey results show that the reform of RMB exchange rate mechanism has little impact on the banking industry's own business activities, and banks actively respond to the reform. Generally speaking, the appreciation of RMB will revalue the assets denominated in RMB. Commercial banks in China mainly deal in RMB, and the value of banks will also be enhanced in the process of RMB appreciation. At the same time, the long-term gradual appreciation of RMB will continue to attract foreign capital inflows, and banks will have abundant funds, which is conducive to the development of various banking businesses. However, risks still exist. One year after the RMB exchange rate reform, Standard & Poor's said in a report that under the worst-case scenario of RMB exchange rate rising by 25% and interest rate rising by 200 basis points, corporate profits will drop by 34%, and non-performing loans will increase to 65,438 yuan +0.7 trillion yuan. According to the company, China's banking industry (stock-loving, quotation and information) is vulnerable to the rapid expansion of credit and production capacity in some industries, and the slowdown in economic growth may expose it to major credit risks. In fact, the banking industry has fully shared the dividend of China's economic growth. However, under the expectation of appreciation, all kinds of funds entered the domestic market. In order to keep the exchange rate relatively stable, the central bank has to buy a lot of dollars, and most of the foreign exchange accounts for commercial banks, which is one of the reasons for the excess liquidity of banks. In the past two years, China has always regarded curbing investment overheating as one of its policy priorities. Under the tight monetary policy, banks are also facing greater operating and profit pressures. Now, if we look at S&P's predictions two years ago, it seems that all of them may come true.