After the RMB broke the 7 mark against the US dollar, there have been constant voices advocating that it will surge to 6 in the future, with a bunch of reasons cooked up. But reality is much more sobering.

Let's look at some numbers first: China's exports account for about 18%-20% of GDP, with manufacturing supporting 170 million jobs, while the average profit margin on exports is only around 5%. What does this mean? It means that the room for RMB appreciation is actually locked in.

A slight appreciation that is too rapid would hurt not just the issue of earning more or less—it's a direct threat to destruction. The bottom lines of maintaining exports and employment cannot be touched, and the central bank is well aware of this. Therefore, although the RMB exchange rate is nominally floating, in reality, it has long been stabilized by the decision-makers at critical moments, and it is not fully market-driven.

What is truly worth warning about is the reverse—if one day it truly depreciates to 6.7 or even 6.5, that would be a signal. By then, it might be necessary to seriously consider switching assets to another currency to preserve value.