subject: The Effect on China's Import and Export of Machinery Industry by RMB Appreciation [print this page] The Effect on China's Import and Export of Machinery Industry by RMB Appreciation
RMB has been appreciating in an increasing rate since China's reform of exchange rate in 2005, and up to now it has appreciated by 21%.
Overall from the long-term trend of RMB exchange rate we can see that the appreciation can help China to get more benefits in the international exchange that is good to the economic development. However, the RMB appreciation should be a long, slow and gradual process. Although the appreciation is of advantage to import, it has larger negative impact to export. Under the current circumstances, the rate should has both increase and decrease with flexible adjustment according to China's economic development. Therefore we should carefully deal with it from our own economic status, not to appreciate because of huge pressure from foreign countries.
First, evaluate the impact that RMB appreciation brings to import and export of machinery industry.
The machinery industry import of 2009 is 180.917 billion U.S. dollars. The payout should be 1.234939 trillion yuan according to one U.S. dollar = 6.826 yuan terms, but under the appreciation of 0.2 yuan it should be 1.198756 trillion yuan according to one U.S. dollar = 6.626 yuan terms which can pay 36.183 billion yuan less than the former.
The machinery industry export of 2009 is 195.824 billion U.S. dollars. The revenue should be 1.336695 trillion yuan according to one U.S. dollar = 6.826 yuan terms, but under the appreciation of 0.2 yuan it should be 1.29753 trillion yuan according to one U.S. dollar = 6.626 yuan terms which reduce income of 391.65 100 million yuan.
When import payout and export earnings come to offset, our income would reduce RMB 2.984 billion. Therefore the income sum just reduces 3 billion yuan compared with the whole industry revenue expenditure, the impact is limited. However, if RMB appreciates by 0.4 yuan, 6 billion yuan income will reduce. By analogy the more RMB appreciates, the greater impact we will have. Such as Zidong Machinery, Caigong Construction Machinery, Fenglie Machinery, Qixin Engineering Machinery.
Second, the export enterprises are facing difficulties.
As the import and export enterprises are under different departments, the principal of importing machinery products is each economic department, and the machinery manufacturing industry mainly imports metal processing machine tools, key parts and raw materials needed by some special equipments and production (such as the orientation of silicon steel, copper, aluminum, etc.). while the machinery exports are mainly enterprises of machinery manufacturing industry, and other industries exports account only for a small share.
For an enterprise, the funding sources of import and export are different. The investment of importing machinery equipments roots in enterprise profits, fixed assets depreciation funds or bank loans, and the listed companies can raise funds from the stock market. However, the export is the running income of enterprise that directly effect its production costs, operational efficiency and welfare of the staff.
Therefore, the RMB exchange rate appreciation will lead to the difficulties of the exports cost increasing and the income reducing to exporters in machinery manufacturing industry.
Above provided by SelectChina.com, and find more information on China Machinery News/ China Machinery Manufacturers.
