The Appreciation of Rmb

Topics: International trade, International economics, Foreign exchange market Pages: 8 (2706 words) Published: June 22, 2013
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Guangdong University of Technology

School of Management

Term Paper of International Business

The influence of the RMB appreciation on China’s

external trade and countermeasures

Group No.: Team 9
谢奇(3211004310)
黄静君(3211004300)
黎启翠(3211004301)
严佳杰(3111004291)
陈伟场(3111004280)

June 20th, 2013

Content
Abstract2
Introduction2
Advantages2
Disadvantages3
Measures4
Conclusion6
References6

Abstract: Recently, the appreciation of RMB has been a hot topic and caused a heated debate. For China, it not only involves the changes in the RMB revaluation, but also affects China's external trade. Through reviewing the RMB exchange rate system’s reform process in recent years, this article amylases its positive and negative effects for import and export trade in our country, especially the influence on China's main export industry, and the continued RMB appreciation under the trend of study of China's foreign trade policy adjustment, at the same time give suggestion to both government and enterprises. Key word: RMB appreciation, external trade, process, positive, negative

I Introduction
As the comprehensive strength of the national economy grows, the Chinese currency, the RMB began to appreciate. Since the implementation of China’s exchange rate reform in July of 2005, RMB has appreciated from 1 US dollar to 8.11 yuan to 6.82 yuan by December of 2008, with an accumulated appreciation of 15.8%. Though full of controversy, the appreciation of the RMB has become common expectations. Effects of the RMB's appreciation have been felt both domestically and abroad, and will become even more significant with time. On January 4, 2006, the RMB exchange rate began to rise significantly at 8.0702, experienced a jump from slowly upward to run. On September 28th, it broke of 7.900, in December 29th, the RMB exchange rate broke the record again, and breaking through the 7.81 mark is 7.81 for the first time. In 2007, RMB exchange rate enter a trend of unilateral appreciation and the middle rate between yuan and dollar kept breaking record. In addition to the dollar, the yuan, relative to other major currencies such as sterling and the yen in 2007 also shows a certain degree of appreciation; Just against the euro as depreciation. On April 10th, 2008, the yuan central parity to break the 7.000 mark! Continuing to rise after the turning point appeared in the middle of July. In August, the appreciation of the RMB rate declined obviously. In October, appear even the monthly trend slightly devaluation. In early December, the RMB exchange rate is a rare consecutive 4 "down". Since 2009, the median price between the yuan and the US dollar in most of the time remaining in the narrow range of 6.82 to 6.83 within narrow range, the adjacent two days in the middle of the price differences are generally not more than 20 basis points. Throughout 2009, the RMB real effective exchange rate depreciation of 6.1%. Throughout 2010, the exchange rate yuan central parity the dollar, the cumulative appreciation of 2055 basis points of appreciation is more than 3%. Continuously break through the RMB exchange rate in June and September 6.8 and 6.7 two mark, hit a record high since 2005. On December 31, 2010, the yuan central parity rate against the dollar at 6.6227 yuan. The central bank data showed that, by the end of 2010, China’s foreign exchange reserves balance has reached as much as $2.85 trillion; an increase of 18.7% and the comprehensive new foreign exchange reserves was nearly $448.2 billion.

II Advantages
There are also many positive aspects to the appreciation of the RMB. In the long run, RMB appreciation will generate more development opportunities. People will feel richer, it will improve China's status and influence in the world economy and it will change the commodity structure and the flow of investment. It...

References: BEI Duoguang, ZHU Xiaoli(2008). A new monetary phenomenon: An analysis of the co-existence of the external appreciation and the domestic inflation of RMB [J].Frontiers of Economics in China, 3(3):327-355.DOI:10.1007/s11459-008-0016-6
Sung Yeung Kwack, Choong Y. Ahn, Young S. Lee, Doo Y. Yang(April 2007).Consistent estimates of world trade elasticities and an application to the effects of Chinese Yuan (RMB) appreciation Journal of Asian Economics, Volume 18, Issue 2, Pages 314–330
http://dx.doi.org/10.1016/j.asieco.2007.01.003
China’s currency(Feb 9th 2013) Yuan for the money
http://www.economist.com/news/leaders/21571442-rise-chinas-currency-will-change-way-world-does-business-yuan-money
Hongjin Xiang,Zheng Zhan,Mingyong Lai(2006).The Trade Destruction Effect and Trade Diversion Effect of RMB Appreciation[J].中国经济前沿,06(3):479-493.DOI:10.1007/s11459-011-0143-3.
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