Some of the impact of the appreciation of the renminbi on foreign trade

The impact of RMB appreciation on the development of China's foreign trade and economic cooperation 1, the overall judgment of foreign trade and economic cooperation by the impact of RMB appreciation Whether in favor of or against the appreciation of the RMB, most people believe that the RMB 3% or so of the impact of a small appreciation of China's foreign trade and economic cooperation may not be large. From the current environment of China's foreign economic and trade, the appreciation of RMB should be acceptable as long as it is within the controllable range.　　First, relative to China's double-digit growth in imports and exports, if the RMB appreciates by 3%, even if the elasticity coefficient is 1, exports will only slow down by 3% and imports will only speed up by 3%. This will not pose much of a problem to the overall development of foreign trade and economic cooperation, as the import and export growth in the second half of 2005 and the first half of 2006 has already proved.　　Second, most of China's exports are materials, processing, the appreciation of the yuan means that the cost of raw materials and parts imports will be reduced accordingly. So the degree of import and export affected than the exchange rate changes in the magnitude of some small. In addition, considering the market and commodity structure, a considerable part of China's import and export commodities demand elasticity should be relatively small.　　Thirdly, whether in exports and utilization of foreign capital, China's competitive advantage is difficult to match. Looking around the world, the rivals that can compete with China in terms of price are often inferior to China in terms of infrastructure, industrial concentration and scale, labor quality and supply, and domestic market potential, etc. After the Asian financial crisis in 1997, China insisted that the RMB did not depreciate, and in fact appreciated sharply in relation to some of its rivals, and although it encountered a great deal of pressure, it still maintained its own advantages in exports and the use of foreign capital. Although it has encountered great pressure, it still maintains its advantages in export and utilization of foreign investment.　　Some researchers use quantitative modeling to analyze the long-term relationship between the weighted real exchange rate fluctuations of the RMB against the world's major currencies and China's imports and exports from 1994 to 2003, which proves that the fluctuations of the RMB's real exchange rate have a significant impact on China's imports and exports, and that the Marshall-Lerner condition is valid, i.e., devaluation (or appreciation) The Marshall-Lerner condition holds, that is, devaluation (or appreciation) can play the role of increasing exports and reducing imports (or vice versa); it also proves that there is a J-curve (hysteresis) effect on the impact of RMB real exchange rate fluctuations on imports and exports.　　The positive effect of RMB appreciation on the development of foreign trade and economic cooperation First, it is conducive to promoting the transformation of the growth mode of foreign trade and economic cooperation. Appreciation of the RMB will motivate export enterprises to rely more on technological progress and improve value-added, rather than low-cost competition to occupy the market. Some only rely on low-cost competition, low technology content, high pollution, high energy-consuming enterprises, may be squeezed out of the market because of the appreciation of the RMB. In the long run, this will bring about an improvement in the export structure, incentives for technological innovation and sustainable development.　　Second, it is conducive to promote part of the export industry to the central and western regions. After the coastal area investment costs rise, some multinational companies will not necessarily withdraw from China. In order to reduce costs, a considerable part of them may turn to inland cities and regions for development. The infrastructure and investment environment in the inland areas have improved significantly in recent years, and they are fully capable of undertaking this kind of industrial transfer.　　Thirdly, it is conducive to improving the terms of trade and reducing import costs. The appreciation of the RMB can bring down the prices of China's scarce imported technology, equipment, capital goods and intermediate products expressed in RMB. In the case of a 10% increase in the price of steel, oil, etc., this increase can be offset if the RMB appreciates by 10%. Consumers' real wealth and purchasing power due to the decline in the price of imports and expand, in favor of expanding domestic consumption demand.　　Fourth, it is conducive to increasing the pace of Chinese enterprises "going out". Appreciation of the yuan means that the cost of Chinese enterprises to invest overseas fell, which allows them to "go out" at a lower cost, according to the location of the investment site to make full use of global resources, reduce production and transaction costs, to achieve economies of scale, and to establish a global production and marketing network. This is conducive to the creation of China's real international competitiveness of multinational corporations.　　Fifth, it is conducive to easing the pressure of trade friction. Low-price competition and exports are suppressed, slow down exports, increase imports, is conducive to weakening China's trade surplus expanding momentum, reduce some trade partners to my protectionist trade attacks on the excuse to create and maintain a smoother trade environment.　　3, the negative effects of RMB appreciation of foreign trade and economic development Most economic analysts agree that if the appreciation of the RMB is too fierce and too large, China's imports and exports and the use of foreign capital will have a considerable negative impact.　　Firstly, the appreciation of RMB will make the price of Chinese exports expressed in foreign currencies rise, thus weakening the international competitiveness of Chinese exports, leading to the reduction of Chinese exports and the plight of some labor-intensive export enterprises. Since the expansion of exports is a powerful engine for increasing employment and driving economic growth, the decline in exports due to the appreciation of the RMB will have a serious impact on employment and economic growth in China, and will in turn have an adverse impact on the global economy.　　Secondly, the appreciation of the RMB will increase the cost of foreign direct investment in China, which is likely to lead to a reduction in the introduction and utilization of foreign direct investment in China in the face of competition from neighboring regions, and will also affect domestic employment and economic growth.　　Thirdly, the appreciation of the RMB will create an illusory sense of wealth and make asset bubbles. China has not yet completed industrialization, per capita GDP is still very low, if this time on the sharp appreciation, may be cut off in certain areas of industrialization, resulting in a large number of unreasonable capital outflow, repeat the mistake of the yen appreciation.　　Fourth, too much exchange rate volatility will create unstable expectations, affecting investor confidence and increasing business costs.　　4, different industries, enterprises and regions affected by different exports in terms of specific industries, exports are affected by the brunt of the textile industry. Some scholars say that China's cotton textiles, woolen textiles, apparel export dependence were 20%, 27% and 60%, and these industries are relatively low profit margins. It is estimated that every 1% appreciation of the RMB, cotton textile, woolen textile, clothing industry profit margins fell 3.19%, 2.27% and 6.18% respectively. Other lower value-added, thinner profits, relying solely on low-cost competition with neighboring countries in the industry export industry will also be relatively large impact.　　In terms of various types of enterprises, state-owned enterprises, export-oriented foreign trade companies, general trading enterprises exports by the appreciation of the yuan to be affected by some of the larger, while foreign-funded enterprises, import and export production enterprises, import-oriented foreign trade companies and processing trade enterprises and so on due to the various ways to self-digest a part of the appreciation factors, so the impact on the export of the general will be a little smaller. If the enterprise's own brand has certain advantages, and pricing ability is stronger, the appreciation of the local currency to improve the foreign currency price of the product, can also reduce the pressure of RMB appreciation.　　In terms of different regions, the central and western regions, to energy and resource-intensive industries as the export pillar of the regional exports by the impact of the appreciation of the yuan will be relatively large, while the eastern coastal areas, the higher degree of industrialization and processing trade in the proportion of the region's exports will be affected by the impact of the general will be smaller.　　Third, to cope with the impact of the appreciation of the yuan policies and measures 1, prudent treatment of the expectations of the appreciation of the yuan, to prevent its too rapid appreciation Some economists believe that the current exchange rate adjustments on the macroeconomic impact is minimal. This suggests that the range of exchange rate fluctuations could be a bit larger in the future. It has been predicted that by the end of 2006, the exchange rate of the RMB against the US dollar may rise to 7.7:1. However, most economists have pointed out that the adjustment of the RMB exchange rate should adhere to the principles of autonomy, controllability and gradualness. "Basic stability of the RMB at a reasonable and equilibrium level" is the optimal exchange rate policy choice at present. The central bank should be careful in exchange rate adjustment under the pressure of appreciation, and should give more consideration to whether the domestic economy has the corresponding capacity to withstand, whether the appreciation is able to solve the trade imbalance, and whether it is able to solve some of the domestic problems, and if not, it should take more prudent measures to take its own interests as the main concern.　　At present, on the one hand, it is necessary to increase the flexibility of the RMB exchange rate, and on the other hand, it is necessary to strengthen the control of the inflow of hot money. Some people suggest redefining hot money. In the past, real estate investment and funds were not considered hot money, but now they should be included in the ranks of hot money and properly managed. Some hot money is likely to come in through trade programs. Some is in other forms of short-term speculation. Such foreign capital inflows should be focused on preventing the formation of new shocks to the RMB exchange rate.　　2. Pay attention to and gradually solve the problem of trade imbalance The Chinese government has repeatedly said that we are not pursuing a foreign trade surplus, but should make it our goal to achieve a roughly balanced growth in imports and exports. The following efforts should be made in the near future: First, the contradiction of the excessive growth of low-efficiency exports should be alleviated by transforming the mode of growth and optimizing the structure of export commodities. In response to the problem of low price competition, corresponding economic policies should be formulated to appropriately raise three costs: (1) Raise the cost of labor, and compel enterprises to provide pension insurance and medical insurance for their workers. (2) Raise the cost of domestic resources, now the resource tax is too low, should raise the resource tax. (3) Raise the cost of environmental protection, so that the production of polluting enterprises unprofitable, lose export competitiveness.　　Secondly, to change the long-standing policy of "awarding and restricting imports", with the relevant policies and measures to expand domestic demand, and to increase imports of our scarce technology, equipment and resources, energy products and so on. Some people believe that it does not matter if there is a deficit in some years.　　Third, adjust the tax preferences for foreign-invested enterprises, from a general tilt towards exports to a greater tilt towards exporting high-tech and high-value-added products. General export-oriented foreign-invested enterprises should no longer enjoy tax treatment superior to that of domestic enterprises.　　Fourth, increase the incentive policy to promote more advantageous Chinese enterprises to invest abroad.　　3, in the appreciation of the yuan at the same time must effectively expand domestic demand Some analysts believe that in recent years, although the appreciation of the yuan is expected to be strong, but compared with neighboring economies, China's terms of trade has deteriorated significantly. This suggests that the surge in China's trade surplus is not primarily due to the undervaluation of the yuan, but rather to a lack of domestic demand. Certain sectors are now experiencing significant overproduction.　　Therefore, in order to maintain internal balance, RMB appreciation must be complemented by a rise in internal demand. In order to expand domestic demand, firstly, the policy orientation should be further tilted towards consumption, especially that of low-income earners; secondly, the government should implement a proactive fiscal policy and increase expenditure on the provision of public **** services, improvement of social security and transfer of payments to low-income areas; and thirdly, it should further improve the environment for circulation in the domestic market, actively develop the service industry, and increase the share of the service industry in GDP and employment absorption.　　In order to stimulate domestic demand, it is not advisable to adopt a tight monetary policy. Some people advocate that if the RMB has to appreciate, it would be better to keep the nominal exchange rate unchanged and realize the appreciation of the real exchange rate through mild inflation. Or let slight inflation appear first, and then let the RMB appreciate.　　4, encourage enterprises to improve internal management, and strive to resolve the negative impact of exchange rate adjustments The relevant regulatory authorities and commercial financial institutions should provide a suitable environment for enterprises to compress operating costs and avoid exchange rate risks through innovation in regulatory methods and innovation in financial services, and encourage and help enterprises to change their mode of growth to meet the test of RMB appreciation.　　Enterprises can take the following measures to minimize the negative impact of RMB appreciation: Firstly, change the "cheap" type of export to "high quality and good price" type of export. Export industries and enterprises with stronger negotiating power can gradually increase the price of export products to absorb the loss of profits caused by the appreciation of the exchange rate. In the creation of brands, improve the quality and grade of export commodities, improve the colors and varieties, improve marketing and other aspects of greater efforts can also be received to expand the profit margin effect.　　Second, strengthen industry coordination. Import and export chambers of commerce and other industry organizations in the qualification, total volume and price of the coordination of enterprises, self-regulation role, to maintain business order, to avoid the appreciation of the yuan produced by the phenomenon of high-priced imports between enterprises competing for purchases and exports of low-priced competitive marketing phenomenon.　　Third, increase international procurement efforts to partially offset the pressure of rising export costs.　　Fourth, through the increase of more valuation and settlement currency, advance receipt of export payments and delay payment of import payments, the use of forward currency hedging tools, the use of trade finance and other ways to reduce business costs and avoid exchange rate risks