Lu Commissar: The Impact Of Exchange Rate Fluctuations On China'S Foreign Trade

After the Chinese new year, the RMB exchange rate against the US dollar generally depreciated. At the same time, the central bank also announced on 15 that the floating range of RMB against the US dollar will be expanded from 1% to 2% on P.

The impact of this change in exchange rate policy on foreign trade is a concern. The empirical analysis of China's import and export data shows that the biggest impact on China's exports and imports is not the change in the exchange rate of the renminbi against the US dollar, but the strength of the effective exchange rate of the renminbi, that is, the renminbi against a basket of currencies.

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< p > the most important policy implication of this analysis is that the policy departments should not pursue the stability of the RMB exchange rate against the US dollar, but should strive to pursue the stability of the effective exchange rate of the renminbi at an appropriate level.

The effective exchange rate of RMB (the nominal effective exchange rate and the real effective exchange rate calculated according to BIS) should be between 95-100 and =100 in 2010, while the current 115-121 level has already been on the high side, and the callback should be considered in the future.

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P > exchange rate changes will have a significant impact on the import and export trade of a country.

After the lunar new year, the RMB exchange rate against the US dollar generally depreciated. At the same time, the central bank also announced on 15 that the floating range of RMB against the US dollar will be expanded from 1% to 2%.

The impact of this exchange rate policy change on foreign trade is a matter of concern.

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< p > we use the statistical method to test the correlation between exchange rate and trade to study the impact of exchange rate changes on foreign trade.

Therefore, the data needed are export, import and exchange rate.

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< p > for foreign trade, in order to reduce the seasonal impact, we chose to import the growth rate of the same month and the year-on-year growth rate of exports in the same month.

For the exchange rate, the RMB exchange rate against the US dollar is naturally within the scope of consideration, considering the settlement of about 80% of China's international trade settlement.

But at the same time, according to the data provided by the chart, considering that in the past ten years, the proportion of the major developed economies in the United States, Europe, the United States, Britain and other countries in the Chinese export market has almost declined by half, and our export market is more diversified than ten years ago (see chart 1).

This means that when considering the impact of exchange rate on foreign trade, it may be more important to measure the effective exchange rate of RMB against a basket of currencies.

Therefore, we have further chosen the RMB nominal effective exchange rate and the effective exchange rate of RMB (BIS) announced by the Bank of International Settlements (in this paper, if there is no need to make a special distinction, the two will be collectively referred to as the "effective exchange rate").

In order to coordinate with the year-on-year growth rate of foreign trade data, in the inspection, we used the RMB yuan to the US dollar exchange rate, the BIS nominal effective exchange rate and the BIS effective exchange rate in the same month.

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< p > taking into account the impact of exchange rate changes on < a href= "http://www.91se91.com/news/index_c.asp" > foreign trade < /a > there is a "lag" or "J curve effect". According to the empirical study of the J curve effect in the literature, the longest lag period is about 2.5 years, and the length of the concrete lag period differs from that of the economy.

To this end, we examine the correlation coefficient from the correlation in the same period to the lag year in the correlation test.

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< p > taking into account the availability of data, the longest test period in this paper starts from 1995 to 2014 months.

Considering the emergence of RMB exchange rate reform and the global financial crisis, these will have an impact on the consistency of data rules.

To this end, we also examined the correlation between exchange rate and import and export in the two periods of 2005 months' RMB exchange rate reform and the two subprime crisis since then.

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< p > first, from the perspective of the impact of foreign trade, we should not focus on the rise and fall of the "a href=" http://www.91se91.com/news/index_c.asp "RMB" /a ratio to the US dollar, but the exchange rate of RMB against a basket of currencies (i.e. effective exchange rate).

Because the previous statistical tests show that the effective exchange rate has a much greater impact on foreign trade than that of the RMB against the US dollar.

Therefore, from the policy point of view, we should consider two questions: first, is the current effective exchange rate too high? Two, how to maintain the stability of the effective exchange rate? Our view is that the effective exchange rate of RMB is already too high. Assuming that labor productivity and technological progress are unlikely to change significantly in the short term, the nominal effective exchange rate and the effective effective exchange rate of BIS are roughly 95-100.

The current level of 115-121 has been significantly overestimated.

It is proposed to maintain stability in the future down to 95-100.

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< p > secondly, the policy department should vigorously push the bilateral a href= "http://www.91se91.com/news/index_c.asp" > exchange rate < /a > risks to the enterprises instead of requiring a stable or predictable exchange rate change.

Because the change of the effective exchange rate of RMB is not only related to the change of the exchange rate of the RMB against the US dollar, but also related to the change of other currencies to the US dollar. In the case of the general trend of the US dollar appreciation in the future, if the other currencies can depreciate against the US dollar and the RMB can not depreciate significantly against the US dollar, even if the RMB does not appreciate against the US dollar, its final result will be a substantial appreciation of the RMB against a basket of currencies, which will cause a severe impact on the foreign trade.

Based on this consideration, a flexible exchange rate between RMB and the US dollar is essential for future shocks.

At this time, the foreign trade policy department should not continue to pursue the stability of the RMB exchange rate against the US dollar or a predictable change in the RMB against the US dollar.

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< p > Third, at present, the loss of foreign exchange is "painful". It is the tuition fee that a company must pay for two-way hedging.

Over the past year, the renminbi has continued to appreciate against the US dollar, which has led to the formation of a fixed mindset that the renminbi will never depreciate. In practice, the enterprises are only avoiding the risk of RMB appreciation, and never consider the possibility of RMB depreciation.

As a result, the depreciation of the RMB against the US dollar after the lunar new year this year has indeed caused some enterprises to make a remittance to the enterprises accustomed to guess the appreciation of the renminbi.

However, it is this exchange loss that will enable them to gradually form a two-way business in the future business.

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