The impact of RMB appreciation on China's foreign trade and economic cooperation 1. The overall judgment of the impact of RMB appreciation on foreign trade and economic cooperation Whether for or against RMB appreciation, most people think that a small appreciation of RMB by 3% may have little impact on China's foreign trade and economic cooperation. Judging from the current foreign economic and trade environment in China, the appreciation of RMB should be acceptable as long as it is under control. First, compared with China's double-digit import and export growth, if the RMB appreciates by 3%, even if the elasticity coefficient is 1, exports will only slow down by 3% and imports will only accelerate by 3%. This will not cause much problem to the overall development of foreign trade and economic cooperation at present. The growth of import and export in the second half of 2005 and the first half of 2006 has proved this point. Second, most of China's export commodities are processed from imported materials, and the appreciation of RMB means that the import cost of raw materials and spare parts will be reduced accordingly. Therefore, the impact of import and export is smaller than exchange rate changes. In addition, considering the market and commodity structure, the demand elasticity of a considerable part of China's import and export commodities should be relatively small. Third, China's competitive advantage is unparalleled in both export and utilization of foreign capital. Looking at the world, competitors who can compete with China in price are often inferior to China in terms of infrastructure, industrial concentration and scale, labor quality and supply, and domestic market potential. 1997 after the Asian financial crisis, China insisted that the RMB would not depreciate, but actually appreciated significantly compared with some competitors. Although the pressure is great, it still maintains its own advantages in exporting and utilizing foreign capital. Some researchers use the quantitative model analysis method to analyze the long-term relationship between the fluctuation of RMB's weighted real exchange rate against major currencies in the world and China's import and export from 65438 to 0994-2003, and prove that the fluctuation of RMB's real exchange rate has a significant impact on China's import and export, and the Marshall-Lerner condition holds, that is, depreciation (or appreciation) can increase exports and reduce imports (or vice versa); It also proves that the impact of RMB real exchange rate fluctuation on import and export has J curve (lag) effect. 2. The positive impact 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. The appreciation of RMB will encourage export enterprises to rely more on technological progress and increase added value, instead of occupying the market by low-price competition. Some enterprises that only rely on low-cost competition, low technology content, high pollution and high energy consumption may be squeezed out of the market because of the appreciation of RMB. In the long run, this will improve the export structure, encourage technological innovation of enterprises and realize sustainable development. Second, it is conducive to promoting the transfer of some export industries to the central and western regions. After the rising investment cost in coastal areas, some multinational companies may not necessarily withdraw from China. In order to reduce costs, a considerable part of them may turn to inland cities and regions for development. In recent years, the infrastructure and investment environment in inland areas have improved significantly, which can completely undertake this kind of industrial transfer. Third, it is conducive to improving trade conditions and reducing import costs. The appreciation of RMB can reduce the price of scarce imported technology, equipment, capital goods and intermediate products denominated in RMB. In the case of steel and oil prices rising 10%, the increase can be offset by RMB appreciation 10%. The real wealth and purchasing power of consumers have expanded due to the decline in import prices, which is conducive to expanding domestic consumption demand. Fourth, it will help China enterprises to "go global". The appreciation of RMB means that the cost of China enterprises' overseas investment is reduced, which enables them to "go global" at a lower cost, make full use of global resources according to the location advantages of investment places, reduce production and transaction costs, realize economies of scale, and establish a global production and marketing network. This will help to create a truly internationally competitive multinational company in China. Fifth, it is conducive to alleviating the pressure of trade friction. Low-price competition and export are restricted. Slowing down exports and increasing imports will help to weaken the momentum of expanding China's trade surplus, reduce the excuses for some trading partners to carry out protectionist trade attacks on China, and create and maintain a more stable trade environment. 3. The negative impact of RMB appreciation on foreign trade and economic development Most economic analysts agree that if RMB appreciation is too fierce and excessive, it will have a considerable negative impact on China's import, export and utilization of foreign capital. First, the appreciation of RMB will increase the price of China's export commodities in foreign currency, thus weakening the international competitiveness of China's export commodities, leading to the reduction of China's exports, and a considerable number of labor-intensive export production enterprises are in trouble. Because expanding exports is a powerful engine to increase employment and promote economic growth, the decline in exports caused by RMB appreciation will seriously affect employment and economic growth in China, and then adversely affect the global economy. Second, the appreciation of RMB will increase the cost of foreign direct investment in China. In the situation of attracting foreign investment competition in the surrounding areas, this may lead to the reduction of foreign direct investment in China, and will also affect domestic employment and economic growth. Third, the appreciation of RMB will create an illusory sense of wealth and make assets bubble. China has not yet completed industrialization, and its per capita GDP is still very low. If it appreciates sharply at this time, it may ruin industrialization in some fields and cause a large number of unreasonable capital outflows, repeating the mistake of yen appreciation. Fourth, excessive exchange rate fluctuations will cause expected instability, affect investors' confidence and increase the operating costs of enterprises. 4. Different industries, enterprises and regions have different effects on exports. As far as specific industries are concerned, the textile industry is the first to be affected by exports. Some scholars say that the export dependence of cotton textile, wool textile and clothing in China is 20%, 27% and 60% respectively, and the profit margins of these industries are relatively low. According to the calculation, for every appreciation of RMB 1%, the profit margins of cotton textile, wool textile and garment industries will decrease by 3. 19%, 2.27% and 6. 18% respectively. Other industries with low added value and low profit, which only rely on low cost to compete with neighboring countries, will also be relatively affected. As far as all kinds of enterprises are concerned, the export of state-owned enterprises, export-oriented foreign trade companies and general trading enterprises is greatly affected by the appreciation of RMB, while the export of foreign-funded enterprises, self-operated import and export production enterprises, import-oriented foreign trade companies and processing trade enterprises is generally less affected because they can digest some appreciation factors by themselves in various ways. If the enterprise's own brand has certain advantages and strong pricing power, raising the foreign currency price of products after the appreciation of the local currency can also reduce the pressure of RMB appreciation. As far as different regions are concerned, the export of the central and western regions and regions with energy and resource-intensive industries as their export pillars is greatly affected by the appreciation of RMB, while the export of the eastern coastal areas, regions with higher degree of industrialization and larger proportion of processing trade is generally less affected. Policy measures to deal with the impact of RMB appreciation 1. Be cautious about the expectation of RMB appreciation and prevent it from appreciating too fast. Some economists believe that the current exchange rate adjustment has little impact on the macro economy. This shows that exchange rate fluctuations can be even greater in the future. It is predicted that by the end of 2006, the exchange rate of RMB against the US dollar may rise to 7.7: 1. However, most people in the economic circles have pointed out that the adjustment of RMB exchange rate should adhere to the principles of autonomy, controllability and gradualism. "RMB is basically stable at a reasonable and balanced level" is the best exchange rate policy choice at present. The central bank should be cautious when adjusting the exchange rate under the pressure of appreciation, and should pay more attention to whether the domestic economy can bear it, whether the appreciation can solve the trade imbalance and some domestic problems, and if not, it should take more prudent measures and put its own interests first. At present, on the one hand, we should increase the flexibility of RMB exchange rate, on the other hand, we should strengthen the control of hot money inflow. Some people suggest redefining hot money. In the past, real estate investment and funds were not hot money, but now they should be included in the ranks of hot money and properly managed. Some hot money may enter through trade projects. Some do short-term speculation in other forms. We should focus on preventing this inflow of foreign capital to prevent a new impact on the RMB exchange rate. 2. Pay attention to and gradually solve the problem of trade imbalance. The government of China has repeatedly stated that we should not pursue foreign trade surplus, but aim at achieving overall balanced growth of imports and exports. The following efforts should be made in the near future: First, by changing the growth mode, optimize the structure of export commodities and alleviate the contradiction of excessive growth of inefficient exports. In view of the problem of low-price competition, we should formulate corresponding economic policies and appropriately increase three costs: (1) increase labor costs, forcing enterprises to provide old-age insurance and medical insurance for workers. (2) Increase the cost of domestic resources. The resource tax is too low now and should be raised. (3) Increase the cost of environmental protection, making polluting enterprises unprofitable and losing their export competitiveness. Second, we should change the long-standing policy of "rewarding excellent products and restricting entry" and increase the import of scarce domestic technologies, equipment, resources and energy products in line with relevant policies and measures to expand domestic demand. Some people think that it doesn't matter if there is a deficit in some years. Third, adjust the tax preferences for foreign-invested enterprises, and shift from general export preferences to more export preferences for high-tech products and high value-added products. General export-oriented foreign-funded enterprises should no longer enjoy tax treatment superior to domestic-funded enterprises. Fourth, strengthen the encouragement policy to promote more China enterprises to invest abroad. 3. While RMB appreciates, domestic demand must be effectively expanded. Some analysts believe that although the expectation of RMB appreciation is strong in recent years, compared with neighboring economies, China's terms of trade have obviously deteriorated. This shows that the sharp increase in China's trade surplus is not mainly due to the undervaluation of RMB, but to the lack of domestic demand. There has been an obvious overproduction in some areas. Therefore, in order to maintain internal balance, the appreciation of RMB must be supplemented by the rise of internal demand. To expand domestic demand, first, the policy orientation should be further tilted towards consumption, especially the consumption of low-income people; Second, the government should implement a proactive fiscal policy and increase the expenditure for providing public services, improving social security and transferring payments to low-income areas; The third is to further improve the circulation environment of the domestic market, actively develop the service industry, and increase the proportion of the service industry in GDP and employment absorption. In order to stimulate domestic demand, it is not appropriate to adopt a tight monetary policy. Some people argue that if the RMB must appreciate, it is best to keep the nominal exchange rate unchanged and realize the real exchange rate appreciation through slight inflation. Or let the 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 adjustment. Relevant regulatory authorities and commercial financial institutions should provide a suitable environment for enterprises to reduce operating costs and avoid exchange rate risks through innovation in regulatory methods and financial services, encourage and help enterprises to change their growth mode and meet the test of RMB appreciation. Enterprises can take the following measures to reduce the adverse effects of RMB appreciation: first, change "good quality and low price" exports into "high quality and good price" exports. Export industries and enterprises with strong negotiation ability can gradually raise the price of export products and digest the profit loss caused by exchange rate appreciation. If we make greater efforts in building brands, improving the quality and grade of export commodities, improving colors and varieties, and improving marketing, we can also get the effect of expanding profit margins. Second, strengthen industry coordination. Give full play to the coordinating and self-discipline role of trade organizations such as the Chamber of Commerce for Import and Export in terms of qualification, total volume and price, maintain business order, and avoid the phenomenon of high-priced import bidding and low-priced export competition among enterprises due to RMB appreciation. Third, increase international procurement to partially offset the pressure of rising export costs. Fourth, by adding more currencies for pricing and settlement, collecting foreign exchange in advance for export payment and delaying the collection of foreign exchange for import payment, and using forward currency hedging tools and trade financing, the operating costs of enterprises can be reduced and exchange rate risks can be avoided.