[abstract] In recent years people by domestic and foreign exchange currency high attention. Firstly, the article will with the RMB for beginning,objectively analyze the situation of the RMB now,And then integrated analysis current currency appreciation to our country the advantages and disadvantages of various aspects, summarizes the impact our government how to deal with problems, cautious appreciation of the yuan to also want to make good use of this opportunity, puts forward some measures of this issue, and proposed own view, yuan appreciation is already a will not against the trend, but not appreciating too rapidly, should be gradual, must meet the development process of China!
[key words] exchange rate, yuan appreciation, beneficial effects, adverse
Contents
Introduction………………………………………………………………….......4
1.The background of the appreciation of RMB……..…………………….…….4
2.The negative influence of RMB appreciation in international.........................5 2.1In Political Terms......................................................................................................5 2.2From The Economic Perspective.................................................................................5
3.The beneficial effects of appreciation of the RMB..........................................5
3.1economic structure and industrial structure ...................................................................5 3.2export trade structure .................................................................................................6 3.3Promote the enterprise improve anti-risk ability..........................................................................................7 3.4Balance Trade conflict………. ....................................................................................7 3.5Improve the effectiveness of monetary policy..........................................................................7 3.6Improve the position of the RMB in the international ..................................................8
4The adverse effect of the appreciation of RMB....................................................8 4.1Damaging exports and the foreign company are not easy to investment .............................8 4.2Intensify exacerbate China's capital outflows ................................................................8 4.3The foreign exchange reserve of our country may shink .................................................8 4.4Add the pressure of getting a job ..........................................................................8 4.5Tourist industry will be damaged .................................................................................8
5How to deal with the RMB appreciation................................................................9
5.1Exchange rate adjustment must adhere to the principle of independence step by step ............................9 5.2Adjust our export structure and industrial structure.....................................................................9
5.3Insist on monetary policy independence..................................................................................10 5.4Expand domestic demand avoid a bubble economy.....................................................10 5.5Improve and perfect the foreign exchange market......................................................................10
6.Conclusion...............................................................................................................10 7.References.............................................................................................................11
Introduction
In recent years, the RMB exchange rate become the focus of attention of the public opinion at home and abroad, the pressure on the yuan will continue to warm up, and of course with the rapid economic development of our country, yuan appreciation also has become a necessity, yuan appreciation represents the constant improvement of China's international position, speed up the yuan as the world monetary process. However the current our country why try to keep the value of its currency RMB stable, and some countries have urgent hope rapid appreciation of the yuan? Facing these problems must be combined with the situation of our country, the comprehensive analysis of the advantages disadvantages of RMB appreciation, taken together, to find out the answer and recognize that other countries forced China to the essence of the rapid appreciation, and proposes some countermeasures. To cap it all, in the face of the rise in the yuan problems, must with China's national conditions and comprehensive pros and cons, firm, is a long-term strategy.
1.The background of the appreciation of RMB
The 1997 Asian financial crisis, China has resisted pressure to keep the RMB is not devalued,
by the various countries praise. In 2003, China is facing the same is even more difficult to withstand huge requirement RMB international pressure, this different is, first, Japan's finance phase in the group of seven finance ministers' meeting in 1985, made a similar to the yen's \"square agreement\" that file, to revalue the renminbi. Then the United States Treasury secretary John snow also said the yuan should rise. And because the dollar falling, Europe and east Asia countries worry that our export goods competition impact, also requires the ranks of RMB appreciation. International appeared on a strong requirement RMB's power. The system already can not adapt to China's economic reform and development.
First of all, fixed nominal exchange rate has lost its real economic significance. In fact, below writtens guarantee carry out assembles a system to suppress and capital management of foreign exchange demand at the same time, create a big part of foreign exchange to supply, and the central bank intervention and in fact the most for the business status, paved over all the real difference between supply and demand. The central bank's benchmark rate is not determined the equilibrium of supply and demand of market real results. Second, the fixed exchange rate system and peg the independence of monetary policies of the fundamental conflict exists, weaken the effect of monetary policy. The yuan to the dollar exchange rate would bounce in close contact with the United States economy in China, which macroeconomic policy, especially the monetary policy formulation is constrained. Again, the nominal exchange rate fixed encourage capital speculation, increases the vulnerability of the financial system. In a free floating exchange rate system framework, the dynamic equilibrium is by market arbitrage funds to maintain the international spontaneously. And in government maintain system of fixed exchange rates, although can exchange rate in the long run remain stable, but its potential hype space but growing. Once the objective conditions for changes to make this system is hard to maintain, a large number of international market speculative funds
of hot money on attack, will with a devastating way release the a profit space, which give monetary system with catastrophic consequences.
Because of the existing exchange rate system in our country there are deadly defect from the above aspects and international pressure, so for the RMB exchange rate system reform and to choose it is already imperative!!!!! On July 21, 2005, people's bank announced, announced that from now on, \"practice based on market supply and demand, the reference to a basket of currencies, a managed floating exchange rate system, the RMB exchange rate will no longer be pegged to the U.S. dollar and a more flexible RMB exchange rate mechanism\". A new program of good and bad are often the people are different, the yuan appreciation of the prelude to open on China's economy's influence is profound, yuan reform in more than two years since the implementation of our country, import and export trade, international investment, international industrial division and domestic industrial structure adjustment, monetary policy and regulation mechanism, even all aspects such as consumer spending have a profound impact.
2.The negative influence of RMB appreciation in international.
2.1In Political Terms
Obvious after yuan appreciation, Europe and many people in many countries of the world to enjoy Chinese products of good quality and low price. Whether to switch to their products, or using other countries substitute, could lead to a domestic price level rise, consumer spending increases, the actual lowering the standard of life. And why Europe and the nation is also constantly to pressure China, forcing people's rapid appreciation than? In order to give China let sleeping dogs lie.
2.2From The Economic Perspective
2.2.1 Against China exports, reduce competition China's coastal many profit ability lower enterprise which is on the exchange rate to maintain this enterprise the appreciation of the RMB lead to these business failures, the enterprise collapse, so in the international market competition with their opponent's a lot less. Besides, there are also part of the foreign capital enterprise in China also hope the yuan rise, they can get more cheap labor .
2.2.2The human costs rise, and lose the competitive advantage
The appreciation of the RMB will lead to China's manufacturing human cost increases, domestic goods in the price on the international competitiveness, our country the already severe export situation will inevitably the gloom, this will cause more unemployed migrant workers. And relative to character in product quality, service of more competitive on the United States and other developed countries will reduce labor costs in products with China on the gap, make Chinese products are tremendous pressure of competition. The United States can alleviate employment pressure.
2.2.3China's foreign exchange reserves rapid devaluation, rushed China's economic
system
RMB appreciation, the dollar was relatively depreciation, China's $two trillion foreign exchange
followed depreciation, China two hundred million migrant workers DuoNian perspiration is equal to is used to give the United States in financial crisis onto us. I believe we have the 80 s \"Japanese recession\
3.The beneficial effects of appreciation of the RMB
3.1 It promote that we change the economic structure and industrial structure.
The national economic structure from the macroscopic Angle, yuan appreciation in the long run will benefit China's economic structure adjustment and optimization. Import and export products structure serious in our country don't match, export products in the forefront of the textiles, agricultural and mechanical and electrical products low added value, yuan appreciation will reduce the industry's price competitive advantage. The short term textiles, agricultural and other labor-intensive industry in China to play the advantage of low labor costs, solve a lot of Labour's employment question, but in the long run these industry development in our country is not convenient deformity of improving the comprehensive national strength, but also to China's economic structure optimization.
The appreciation of the RMB objectively can promote our country's long-term by devoting major efforts to developing high value-added industries optimize economic structure in our country. When the currency appreciation, capital will be looking for high-tech high value-added industry investment, and make the industry more money for technology innovation reform, increase their international competitiveness.
3.2export trade structure
Optimizing export trade structure, expanding domestic demand and help our country to form stable economic growth trend.
In the world market, our products at reasonable prices. Once the RMB exchange rate rise, to our country labor-intensive export products in the competitiveness of the international market, which in some damage. But in the long run, yuan appreciation will spur the export enterprise relied more on technology progress and improve the additional value, some only by the low cost competition, technical content is low, high pollution, gas-guzzling enterprise will be driven out of the market, so as to improve our export structure, and realize the sustainable development.
From the trade structure speaking, our country should be a domestic demand economic powers, the proportion of domestic-demand shoulds not be too big, adjust the foreign trade
development strategy, promote the vulgar foreign trade export generated by the scale to benefit generated change is already imperative. The appreciation of the RMB to help promote China's export trade structure, and speed up start domestic demand, increasing imports of consumer purchasing power, and form of the combination of the domestic and foreign trade development situation.
3.3Promote the enterprise improve anti-risk ability.
Promote the enterprise change management mechanism, strengthen the ability of
independent innovation, and improve the international competitiveness and anti-risk ability. Our country enterprise long-term low price to capture the international market practice, actual it is the result of the competition in the bargain. After RMB appreciation, enterprise want to international market in an invincible position, we must reduce the purchase price of the means of production or improve the management way to compress the production cost. The cost of production and compression is not large space, therefore, the enterprise must from their own management of operation, the content of science and technology to improve productivity, improve quality, in order to enhance competition ability. At the same time, the reform of the RMB exchange rate system requirements export enterprise continuously developing out high technology content, high value-added products, including foreign exchange forward on sale in domestic financing, financial means $lending use of risk. This will help enterprise develop watch international dynamic, timely prevention from exchange rate risk, and to further enhance their international competitiveness of enterprises laid a solid foundation.
3.4Balance Trade conflict
As to the RMB exchange rate system reform, China's export products in the production
cost and international price shall be forced to ascend, yuan appreciation although cannot solve the problem of huge trade balance, but also can rise to alleviate indirectly with the United States, Japan and other major trading partners in the low on anti-dumping trade friction.
3.5Improve the effectiveness of monetary policy, China's monetary authorities better use the monetary policy enhancement of macro economic control ability
In the face of economic \"overheating\" situation, our country government to implement the \"steady\" . At the same time, in the face of foreign exchange continuously flows into, the central bank had to passively launched a big of the base currency, and excessive monetary base issue brings the inflation pressure, thus in the weakened to some extent the effectiveness of monetary policy. The rise in the yuan makes our this passive currency issued the decrease in the number of, monetary policy independence got certain assurance
3.6Improve the position of the RMB in the international
RMB revaluation of the yuan would enhance the ability to pay, improve the yuan in the
position in the international monetary system
3.6.1Our country foreign debt in reducing the pressure
Since the reform and open policy, to speed up the economic development , borrowed a lot in our country foreign debt. According to the state administration of foreign exchange, according to figures released by the end of 2004, China's foreign debt balance reached $228.6 billion, a 18% growth, including short-term foreign debt faster growth, amount to have accounted for 45.6% of the total, beyond the internationally recognized the cordon of 40%. After RMB appreciation, outstanding external debt servicing for the number of local currency will be reduced correspondingly, relieves the pressure of our country to repay the debt.
3.6.2 Increase China's personal wealth effect
With the constant development of economy and the people's standard of living has greatly improved, more and more people like holidays abroad, tourism or accept education . After RMB appreciation; Study abroad or travel, will spend less money than before; Or, to spend the same money, will be able to do more than before. In the 1980 s the Argentine, is in after the peso appreciate traveled all over the world, because they turned into \"the south of the country the rich\".
3.6.3It is good for investment in other country
Appreciating renminbi means our enterprise to overseas investment cost down.These are
conducive to make a our country really has the international competitiveness of the multinational company.
In the country's economic development, the largest foreign exchange reserves increased background, in the international monetary system status will be promoted step by step.
4 The adverse effect of the appreciation of RMB
4.1Against the export and attract foreign investment
1 billion dollars from the our country can buy goods, after RMB appreciation, buy the same quality and quantity of the goods, foreign importers to pay millions of dollars or more to get the....... Foreign investment in former sure need to weigh the gain and loss.
4.2 It could exacerbate China's capital outflows
RMB appreciation, can make the original $1 billion in overseas to be accomplished in investment, after using less millions will rise even millions of dollars to complete, so will accelerate capital outflows.
4.3The foreign exchange reserve of our country may shink
Currently, the country's foreign exchange reserves had overtaken Japan, ranked first in the world. Plenty of foreign exchange reserves is China's economy has been strengthened, the level of opening up the important sign of the growing, and we promote national economic development, participate in foreign economic activities of a powerful guarantee. However, once the yuan rise, massive foreign exchange reserves in China is facing the possibility of shrink.
4.4Add the pressure of getting a job
RMB appreciation in countries such as the United States after the importer import less, the
local people may switch to their products, which will increase their country's employment, increase China's employment pressure.
4.5Tourist industry will be damaged
RMB appreciation will lead to overseas tourists in the mainland tourism spending increase in
tourism to tourists and foreign exchange earning less. Tourists or to more spending, or to reduce tourism consumption during the standard, this may make them turn to other countries or tourism in the area.
5How to deal with the RMB appreciation
5.1Exchange rate adjustment must adhere to the principle of independence step by step
The basic economic adjustment is often slow the process of gradual, accordingly, the
exchange rate adjustment should also take the form of slow gradually. Gradual adjustment risks small, also the most efficiency. Prime minister wen jiabao should follow the \"initiative, controllability and progressive\" three principles. Consider the attitude of the outside world, but not to succumb to external pressures. First to insist the principle, the main body of the clearly China and the leading status; Next to be good at communication and struggle, the reason the beneficial nodose; In addition must insist on a modest, to advance steadily, the amplitude control in most domestic enterprise short-term can withstand range.
5.2Adjust our export structure and industrial structure
Those low value-added especially with serious consumes resources and the cost of destroying the environment to export goods, we can gradually give up; And this opportunity, speed up the adjustment of the export structure, and optimize industrial structure, and enhance the production enterprise and foreign trade the enterprise the competitive ability.
5.3Insist on monetary policy independence
In the balance of payments and foreign exchange reserves for surplus increased, the money supply expansion, inflation pressures, through monetary policy and fiscal policy is tie-in, not only control the money supply, inflation, and internal and external demand conspire to keep the appropriate stimulation, prevent the dramatic ups and downs of the economy. To meet the great appreciation pressure from abroad and domestic housing market, the stock market partial hot, the more need to external transmission resolutely safeguard of monetary policy independence clear signals that can never make monetary policy is attached to the exchange rate policy.
5.4Expand domestic demand avoid a bubble economy
In the adjustment of the exchange rate and relax foreign exchange control, can to a certain extent, reduce pressure to allow its currency to appreciate. In addition, must be effective expanding domestic demand to correctly guide investment flows, prevent a stronger currency after the blind investment and industry KongDongHua phenomenon, especially to prevent foam assets and the bubble economy. Exchange rate policy and other expansion of demand only policy reasonable collocation, can make the economy sustainable, stable growth.
5.5Improve and perfect the foreign exchange market.
6Conclusion.
The appreciation of the RMB trend is inevitable, but must not be too fast development, facing the yuan appreciation, believe that the government can work out a reasonable plan and measures, actively and steadily promoting the RMB exchange rate reform, and guide enterprises to strengthen structure adjustment, stable structural reform through. Enterprise can also actively promote the pace of structural adjustment, changing the management mechanism, improving the ability to deal with the exchange rate. Believe that China's exchange rate system reform will make us more to adapt to the increasingly complex international economic situation, make our country on the international stage play a more important role.
7References.
1、俞永定.消除人民币升值恐惧,实现向经济平衡发展的过渡[J].国际经济评论,2006(8). 2、刘阳.均衡汇率与人民币汇率机制改革[M].西南财经大学出版社,2006. 3、王元龙.人民币汇率形成机制的完善[J].经济理论与经济管理,2005(3).
4、吴念鲁.金融热点探析:形势、汇率、、股改及其他[M].中国金融出版社,2005.
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