2010-09-04 01:31:08 by Admin
Exchange rate is important for every country, which has an abundant influence on economy. Nowadays, every country is fight for the economic crisis, the appreciation of RMB is a double-edged sword. Based on the special international situation and Chinese economic background, the author is going to analyze the both positive and negative impacts on China's economy brought about by RMB appreciation.
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1. Favorable Effects of RMB Appreciation
Effects of RMB appreciation can be reflected mainly in three aspects. First, RMB appreciation can stimulate import, because foreign goods and materials are relatively cheaper than before. Second, RMB appreciation can improve investment environment and attract more investment. Third, RMB appreciation can, to some extent, release burden of external debt servicing. Increase of RMB foreign exchange reserve can reduce the external debt servicing. What’s more, people will feel richer; it will improve China's status and influence in the world economy and will change the commodity structure and the flow of investment. It will also have a significant influence on the structure of domestic production resources.
2 Negative Effects of RMB Appreciation
2.1 Decrease of Export
RMB appreciation means increase of costs for export enterprises. If international price does not change, export enterprises will face decrease of profit, which will undoubtedly influence enthusiasm of export. If export enterprises put up price to enhance profit, then their competitive capacity will be weakened. Therefore, RMB appreciation is a serious shock for export enterprises, especially for labor intensive industries.
2.2 Influence the Stability of Financial Market
As a main part in capital market, hot money is characterized with large-scaled funds and high-frequency flowing. Hot money is the potential factor causing the turmoil of financial market. Therefore, it is important to push reform and perfection of Financial Supervision System in China.
2.3 Affect Efficiency of Currency Policy
RMB appreciation can bring burden to Chinese economy. In order to keep RMB stable, Chinese government has to force central bank to buy large amount of foreign exchange. Seeing from surface, quantity of currency increases, but the supplying structure will be damaged and funds utilization efficiency will be lowered. Efficiency of currency policy thus will be influenced.
2.4 Cause Unemployment
RMB Appreciation is a serious shock for export enterprises and these enterprises can provide a large amount of job to solve unemployment problem in China. If lots of export enterprises close down, hundreds of thousands people will lose job. Especially for China, a big population country, this consequence is horrible.
