RMB Appreciation, Export Shoe Enterprises Profit Decline

The central parity of the RMB against the US dollar was 6.992 yesterday. Since the reform, the total appreciation has exceeded 18% yuan. Yesterday (10) marks an important milestone. The US dollar has fallen below the 7 yuan mark for the first time since 1993. According to the latest data released by the people's Bank of China authorized by the China Foreign Exchange Trading Center yesterday, the RMB exchange rate between the RMB and the US dollar in the inter-bank foreign exchange market was "broken 7" for the first time, to 6.992 yuan to 1 dollars. In July 2005, the RMB against the US dollar 8.22765:1 before the reform was calculated. At present, the RMB has appreciated more than 18% against the US dollar. In other words, the same exchange of 1 dollars, now less than two years ago, it can spend less than 1.2845 yuan. Appreciation rate: this year has appreciated by 4.47%. Since the central bank started the RMB exchange rate formation mechanism reform in July 2005, the RMB exchange rate formation mechanism no longer keeps the US dollar peg exchange rate mechanism, and the exchange rate of US $1 is no longer limited to 8.23 yuan. The RMB exchange rate against the US dollar has been showing a slight upward trend over the past two years. However, with the passage of time, the pace of appreciation of the RMB against the US dollar has accelerated significantly this year. In March 13th of this year, when the central parity of RMB against the US dollar broke through the 7.1:1 pass, "breaking 7" was already expected in the market. Data show that this year, the RMB exchange rate against the dollar has reached a record high, with a total appreciation of 4.47%. In 2007, the appreciation rate of RMB against the US dollar was 6.5%. Although there are many factors that affect exchange rate changes, market participants generally believe that the continued depreciation of the US dollar is the main factor leading to the acceleration of the appreciation of the renminbi against the US dollar. Chen Wuyuan, an economist at the Sichuan Academy of Social Sciences, said that the appreciation of the renminbi is a double-edged sword. It will bring benefits to some import industries, but it will also bring great pressure to some labor-intensive Chinese export enterprises, which will make it more difficult for some labor-intensive export enterprises to operate. Beneficial effects: it helps to curb inflation. The appreciation rate of RMB against the US dollar over the past 18% years has brought favorable effects to the consumption of the people. Since the purchasing power of the renminbi against the US dollar has increased, the citizens are getting cheaper and cheaper to go abroad to study, travel and buy imported goods. In addition, a substantial appreciation of the renminbi is believed to help curb inflation. Controlling excessive inflation and curbing inflation is an important task of macroeconomic regulation and control this year. The first meeting of the central bank's monetary policy committee, which was recently held in Beijing, also suggested that preventing the rapid rise of the general price level is the central task of this year's financial macro-control. Many economists have said that domestic CPI growth has reached a new high of more than 10 years, one of which is mainly due to imported inflation. As the US dollar continues to depreciate, the prices of commodities linked to the US dollar in the international market, including oil, steel, copper, ore and grain, continue to rise sharply or run at a high level. These price increases have also been transmitted to China, increasing domestic inflation pressure. Against this background, Ba Shu song, a researcher at the Financial Research Institute of the State Council Development Research Center, believes that RMB appreciation helps to curb inflation, and it is necessary to promote the appreciation of the renminbi in the controllable degree in the future. He pointed out that the relevant agencies had calculated that if the RMB appreciated by 10%, the price of imported oil, soybeans and pork would drop by about 10%. Adverse effects: the pressure on export enterprises and the increasing appreciation of RMB is another aspect of export enterprises, which is facing increasing pressure. Insiders said that the renminbi appreciated by 10 percentage points against the US dollar, and the growth rate of export enterprises was slowed down by 3 to 4 percentage points in general. Since the beginning of this year, the accelerated appreciation of the renminbi has brought more and more impact on enterprises that are basically without pricing power in 23.10,1.10,5.00% and low-end textiles. By the end of 2007, according to the questionnaire survey of thousands of enterprises in China's entrepreneur survey system, if the RMB appreciation in the next year is faster than that in the past, 36.8% of the business operators think that the "greater impact" on the export of products will be increased by 6.8 percentage points over the previous year's survey data. "A pair of shoes should be sold at least 25 yuan at present, and profits will be thinner and thinner." Faced with the constant innovation of RMB exchange rate, Chen Changguo, chairman of shoe industry in Chengdu, looks very helpless. He said that if the appreciation of the renminbi increases by one percentage point, the profits of shoe companies will also drop by one percentage point. Expert analysis: the appreciation will slow down. "In the context of the current inflation pressure is still very large, the RMB will continue to appreciate against the US dollar, but the appreciation will slow down. This year, 1 yuan against the renminbi is unlikely to fall below 6.5 yuan." Chen Wuyuan said. Wang Tao, director of economic research and strategy at greater China, said that in the first quarter of this year, the renminbi appreciated rapidly against the US dollar, more than 4%, partly due to the depreciation of the US dollar. He said that in the long run, the renminbi will not continue to appreciate against the US dollar at an annual rate of 15%. Once inflation pressure makes the export data obviously slow down or weaken, the adjustment speed of the RMB exchange rate against the US dollar will weaken. He predicts that the RMB exchange rate will break 6.8 by the end of June this year, and will rise to 6.65 by the end of this year.