An Investigation Report On The Impact Of RMB Appreciation On Export Enterprises

From the 05 year to the end of April, the RMB appreciation against the US dollar has risen to 18%. Although the euro has been devalued for 07 years, with the trade protection from the European Union and the slowdown of the EU regional economic growth, it is possible to predict the reversal of the depreciation of the RMB against the euro in 08 years.

Under the background of rapid appreciation of RMB and deterioration of external environment, China's export enterprises will face enormous challenges.

According to this survey, nearly 57% of small and medium-sized export enterprises have a profit margin of less than 5%, accounting for 28% of the profit margin, and only 9.57% of 10%-15%, compared with 5.45% of 5%-10%. The profit margins of small and medium-sized export enterprises in China are not high, especially in the labor-intensive manufacturing industries such as textiles, clothing, shoes and hats. 84.07% of the export enterprises have a profit margin of less than 5%.

Under the background of rapid appreciation of RMB, China's export enterprises will face severe pressure to survive.

In view of the accelerating trend of RMB appreciation, our research group has made a statistics on the appreciation rate of RMB that the exporters can tolerate.

Divided into five grades, that is, below 2%, 2%-4%, 4%-5%, 5%-6% and 6%, it is found that the RMB appreciation rate that the export enterprises can tolerate is mainly concentrated in 2% (below 2%), and some enterprises (707) account for 39.7% of the total number of samples, followed by 2%-4% (602, 33.8%), 4%-5% (340, 19.1%), 5%-6% (19.1%), and above (above).

Less than 30% of the exporters could tolerate more than 4% yuan appreciation.

Among them, textile, clothing, shoes and hat manufacturing industry can tolerate RMB appreciation rate of 2% (including 2%) up to 44.5%, while the number of enterprises that can tolerate more than 6% is zero.

The RMB appreciation rate will accelerate in 08 years. The appreciation of RMB against the US dollar in the first three months has exceeded 4%. It is foreseeable that the export pressure of small and medium-sized export enterprises will be greater in 08 years.

The export enterprises absorb the domestic surplus labor force, but there are still problems in urban and rural areas, regional differences and polarization between the rich and the poor. Therefore, from the present point of view, China should make full use of the labor-intensive enterprises such as export enterprises to create more jobs.

In recent years, China's economy has maintained a growth rate of over 10%. In the context of insufficient domestic demand, the excess capacity generated by investment can only be digested through export demand. As of the end of 2007, China's foreign exchange reserves reached 1 trillion and 530 billion US dollars, reaching 1 trillion and 756 billion US dollars in April 2008.

In this case, the government increased the domestic demand and increased the regulation of exports. In July 2007, the Ministry of Commerce announced the measures to reduce export tax rebates.

At the same time, the exchange rate of RMB against the US dollar has reached a record high after 05 years of exchange rate reform, and its total appreciation has reached 18% in April, and the "reduction effect" brought about by RMB appreciation has begun to appear.

From the external situation, the subprime debt crisis caused the economic recession in the United States has basically become a reality. The European Union has been slowed down by its subprime debt crisis.

As China's main export market, this means that the demand for export products in China will probably decrease substantially.

According to statistics, China's total exports account for more than 35% of GDP, which plays an important role in promoting economic development. Export-oriented enterprises have a unique advantage in absorbing surplus labor force.

However, under the background of the rapid appreciation of RMB and tight credit, these small and medium-sized export enterprises are under double pressure of falling profits and breaking capital flows.

In order to better measure the impact of the rapid appreciation of RMB on export enterprises, the China banking research center of Central University of Finance and Economics has set up a "study on the impact of RMB appreciation on export enterprises".

Through collecting data information of export enterprises and combining with relevant theories, the research group finally obtained the degree of influence of RMB appreciation on export enterprises, and put forward some targeted policy recommendations accordingly.

The research scope of this report is mainly for Liaoning, Hebei, Tianjin, Shandong, Jiangsu, Shanghai, Zhejiang, Fujian, Guangdong, Guangxi and Guangxi, and other coastal provinces and cities export enterprises, with a total sample size of 1900.

Among them, a representative sample of 1780 small and medium-sized export enterprises 1 is selected as a sample of this research.

The basic composition and industry distribution of sample enterprises are shown in Table 1: 1. Table 1, the basic situation of the sample enterprises. 1. The basic situation of the sample enterprises is divided into three parts: the first part is the preface; the second part is the main body of the report. Combined with the findings of this study, the influence of RMB appreciation on export enterprises is analyzed from different aspects.

(two) the impact of RMB appreciation on export enterprises. Since the 05 year's reform, the appreciation of RMB against the US dollar has been increasing faster and faster. In the past 06 years, the RMB has appreciated 3.35% against the US dollar, while in 07 years the appreciation of RMB against the US dollar has reached 6.2%.

Over the past 08 years, the appreciation rate of RMB has reached 5%.

The renminbi has maintained a fluctuating trend towards the euro exchange rate.

In 06 years, the yuan depreciated 5.74% against the euro, and 3.78% in 07 years.

The cumulative depreciation rate of RMB against the euro in the three months 08 years ago was 3.91%, but so far, the renminbi has appreciated 1.64% against the euro in April.

According to the survey results, the impact of RMB appreciation on export enterprises is shown in the following aspects: (1) RMB appreciation does not reduce the cost of raw materials in a large scale, and the cost growth rate of the 80% export enterprises is above 5%. For most export oriented enterprises, raw material costs occupy an important part of their production costs.

(Table 2) 2 samples of raw materials of raw materials for production enterprises of the sample enterprises. 2, the source of raw materials for the sample enterprises can be seen from table 2. In the 1780 sample enterprises, 1570 raw materials for export enterprises are from China, accounting for 88.20% of the total sample size, while 187 from foreign countries account for only 10.51% of the total sample size.

For agricultural and sideline products processing industry, food, beverage, tobacco manufacturing and textile, clothing, shoes, hat manufacturing industry, etc., most of the raw materials used in its production come from China, accounting for 91.62%, 92.78% and 90.46% respectively.

It shows that the raw materials of China's export-oriented enterprises mainly come from China. Therefore, the supply of raw materials such as domestic resources determines the production cost of most small and medium-sized export enterprises in China.

Because most of our enterprises are in a high input mode of extensive growth. With the five digit economic growth for two consecutive years, various resources and energy consumption is huge. Strong demand has pushed up the price of raw materials in China.

The cost of most small and medium-sized export enterprises is also rising due to the rising price of raw materials.

On the other hand, according to the process of investigation, most export enterprises adopt the mode of long-term contract pricing. Under the background of rising prices of raw materials, the increase of production costs can not be immediately pmitted to the price of products, so the risk can only be borne by themselves.

At the same time, because most small and medium-sized export enterprises in China are small and have no own brand, bargaining power with foreign large importers is weak, and they can only accept the price of the other party passively, so the rise of the cost is difficult to pass on the export price. In addition, because the RMB has been on the rise against the US dollar, and most of the export enterprises in China adopt the way of US dollar settlement, therefore, the exporters should face the exchange loss 2 when they face the pressure of rising production costs and can not pass the risk.

For export enterprises whose raw materials are abroad, although the appreciation of the renminbi can theoretically reduce their import costs to a certain extent, most international resources are monopolized by large companies. However, because of the small scale, the single export enterprises in China often fail to work together with foreign resource exporters when negotiating prices, which results in an opportunity for foreign resource exporters. Under the background of their small size, China's export enterprises can only passively accept the high price of foreign resources exporters.

In addition, due to the existence of speculative factors in the international commodity market, many resources and energy prices are too high, and most of the resources price rises exceed the normal demand growth rate. For example, in 2007, the international iron ore, oil prices and grain prices rose by more than 50%.

Taking all these factors into account, even if the RMB has been in a state of appreciation for the exporters of raw materials abroad, the appreciation of the renminbi is less than the rise of international energy and resources prices. The cost of raw materials that can be reduced by the appreciation of the renminbi can not completely cover the pressure of export.

Therefore, on the whole, the rapid appreciation of RMB does not substantially reduce the cost of raw materials.

At the same time, according to our statistics on the cost growth rate of export enterprises, the cost growth rate of export enterprises is mainly concentrated in 5%-7%, which accounts for 35.8% of the total number of sample enterprises, followed by 7%-9% (351, 19.7%), 5% below (336, 17%), 11% above (236, 13.4%), 9%-11% (220, 220).

From the above data, we can draw a conclusion that 83% of the export enterprises' cost growth rate is above 5%.

For most of the export enterprises in China, the cost of raw materials has been on the rise. With the implementation of the new labor contract law in 08 years, export enterprises need more expenditures on the employees of enterprises, and the cost of labor will rise greatly.

In addition, considering the protection of environmental resources, the cost will be further increased for the high energy consumption and high polluting export enterprises.

It can be seen that the cost of export enterprises is bound to maintain a relatively fast growth level, and the survival pressure of export enterprises has increased dramatically.

(two) the profit margin is generally low, and the profit growth rate of the 50% export enterprises is below 6%. An important indicator of the operation of the enterprises is the after tax profit rate.

We divided the sample enterprises' profit after tax in 2007 into five grades, that is, 3%, 3%-5%, 5%-10%, 10%-15% and 15%.

It can be found that after 07 years, the after tax profit rate of export enterprises is mainly concentrated in 3% and 3%-5% two segments. Some enterprises (1015) account for 57% of the total sample enterprises, while 3% of the enterprises (541) account for 30.4% of the total sample size, and low profit margins are still a major feature of our export enterprises.

This is mainly based on the following reasons: first, China's export products still have low technology content and small added value of products. Most export enterprises belong to the simple processing trade type, and can only get meager profits.

Second, the rising cost of production in China's export enterprises is mainly reflected in the cost of raw materials and labor costs.

Because most of the export enterprises in China are small and medium-sized export enterprises, there are a large number of large scale but small scale characteristics, and no good price coordination mechanism has been established between them. Therefore, the bargaining power of export has not increased with the increasing total volume, and the rise of cost is difficult to pass through the increase of price.

Third, as domestic labor costs rise and India, Indonesia and Vietnam encourage their processing trade, the market share of domestic export enterprises is squeezed.

The characteristics of low technology content of processing trade products can only force export enterprises to adopt the strategy of "win the price", thus causing the export enterprises to compete for a low price share.

Fourth, influenced by the US subprime mortgage crisis, China's exports to the United States have declined. In addition, the euro zone economy has begun to show signs of slowing down.

The rise of international trade protectionism has greatly increased the cost of China's exports by developed countries using technology, tariffs and other barriers.

Fifth, most of the export enterprises in China adopt the US dollar settlement, and the appreciation of the RMB against the US dollar has led to the loss of the profits of the export enterprises.

The above fully shows that under the influence of various factors, the profit margins of export enterprises are generally low, and the rapid appreciation of the renminbi will undoubtedly cause a huge impact on export enterprises 5.

At the same time, the profit growth rate of export enterprises is relatively low.

From Figure 3, we can find that the average profit growth rate of export enterprises in the past three years is mainly below 4% and the two intervals of 4%-6%. Among them, the enterprises with profit growth rate below 4% accounted for 35.14% of the total number of sample enterprises, followed by 4%-6% (424, 23.80%), 6%-8% (271, 15.21%), 8%-10% (15.21%), and above.