The Appreciation of the Rmb

Topics: Investment, Renminbi, Economy of the People's Republic of China Pages: 3 (1032 words) Published: February 8, 2012
Firstly, the appreciation of the RMB will benefit the people. On the one hand, it will make imported products relatively cheaper. It will also be cheaper for Chinese to travel abroad. This will increase consumption. On the other hand, it will decrease imported material’s price and reduce the level of market price . If other conditions don't change, Chinese people will feel richer as the value of their money grows and further stimulates domestic demand. Secondly, it will accelerate industrial upgrading. In fact it is likely that the outcome would be even worse for the US and better for China. The appreciation of Chinese yuan would knock out low-tech, low-efficiency or labor-intensive industries in China and expedite Chinese industries' upgrade in response to decreasing revenues. It is unlikely that Washington wishes to see China's technology become stronger and less dependent on technology imports from the US. Thirdly, it will promote technical innovation. The competitive edge of China's manufacturing rather than the exchange rate has decided China's export competitiveness. Some low-end producers will be washed out. Therefore the appreciation will encourage their to become high-end companies. Although China would lose its low-labor-cost advantage because of RMB appreciation, it would benefit China's industrial transformation and enhance Chinese consumers' purchasing power. RMB appreciation reflects the success of Chinese economic development after reform and opening up. It is also an important turning point in China's social and economic situation. The downsides to RMB appreciation shouldn't be overemphasized. The fluctuation of the RMB is the result of changes to the current economic structure and will have an important impact on the economic structure of the future. Maintaining the status quo is short-sighted and will harm the long-term interests of China. The best choice is to speed up the transformation of the economic growth mode and adapt to the...
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