China'S Low Cost Export Advantages Disappear Rapidly And Exchange Rate Depreciation Is Difficult To Change.

At present in China

The traditional labor-intensive export-oriented enterprises represented by the rise of labor costs, especially the market share of low-end products have been greatly reduced, and overseas market orders have been snatched away by countries such as Southeast Asia. Part of the labor-intensive enterprises are accelerating the production base from the southeast coastal areas of China. A slight depreciation of the renminbi in the short term can not stop the trend of the industry's pfer. The overall proportion of traditional export oriented enterprises in China will continue to decline, and the favorable export benefits brought about by the depreciation will also be very limited.

Overall, in the short term, the devaluation of the RMB has a certain boost to exports, but China's exports are still at the bottom stage, constrained by the global wave of depreciation, the elasticity of exchange rate elasticity of change, the low cost of disappearance and the unoptimistic demand for overseas demand.

According to the relevant leaders, the government did not intend to adopt a depreciation policy to promote exports, but rather aimed at improving the exchange rate mechanism. The key to improving export products is to enhance the competitiveness of export products.

In August 11th this year, the central bank announced that the central parity of RMB against the US dollar was 6.2298, and the single day reduction was 1.9%, the largest decline in history.

Since then, the RMB exchange rate has rebounded, but in November, when the Fed raised interest rate expectations, there was another round of downward trend.

Will China's exports improve after the depreciation of the renminbi?

According to the report, from 1997 to date, the real effective exchange rate of China's RMB and the year-on-year growth rate of exports show that the real effective exchange rate of the RMB is ahead of the growth rate of exports for half a year.

However, as the global economic situation and trade conditions change, the effect of RMB depreciation on export is weakening.

From Japan's experience, the Japanese yen has depreciated more than 40% since 2012, but Japan's trade deficit has widened.

It can be seen that the depreciation of the local currency exchange rate does not immediately effect the improvement of terms of trade. Is there a causal relationship between the high correlation between the two, or is it derived from the unified reflection of the two on the macroeconomic situation, which is still worth pondering.

In addition, the devaluation of the RMB will likely bring a competitive devaluation of the other major currencies of the world; the volatility of the exchange rate will be violent, but the elasticity of the export to the exchange rate is less flexible because of the oversea customer pressure; China's low cost export advantage is rapidly subsiding, even if the exchange rate devaluation is difficult to change.

At the same time, while many emerging market countries are facing the risk of capital outflow, their currencies are also in the process of devaluation.

Against the backdrop of the US dollar appreciation, oil price collapse and commodity price declines, Russia's rouble tumbled, and the currencies of Malaysia, India, Thailand and Indonesia were all sell-off. All these devaluates will weaken the role of RMB depreciation in China.

Exchange rate movements in most emerging market countries are consistent with the renminbi.

Besides, the currencies of developed countries began to depreciate sharply against the US dollar.

Asia accounts for the largest share of China's exports, and Asian countries following China's currency devaluation are more important destinations for China's exports.

At the same time, at the same time, under the background of global total demand level contraction and export growth decline, the major economies of the world will take corresponding measures in order to protect their goods and employment market. Although under the current global economic integration and trade liberalization, we can not carry out neighbour trade wars, large-scale foreign exchange control and trade protection during the great depression, but the protection of their economy within the scope of rules will weaken the price advantage brought by RMB depreciation to China's export commodities.

The result is that the competitive advantage that Chinese export enterprises can get from currency devaluation will be compressed, and the devaluation effect of currency depreciation on exports will be greatly reduced.

The exchange rate fluctuates violently, the RMB depreciation elasticity is smaller, and the overseas customers have a price reduction phenomenon.

As the renminbi goes against the US dollar

The market reform of the middle price quotation mechanism goes further, and the two-way fluctuation of RMB exchange rate will continue to intensify in the future.

When the exchange rate hedging strategy is not perfect and the enterprises lack the ability to deal with exchange rate risk, some export enterprises tend to be more flexible when signing contracts, with short term small contracts as the main ones, resulting in a shrinking turnover.

In addition, if the elasticity of the exchange rate and the exchange rate of the US dollar against the RMB is analyzed flexibly, the depreciation of the RMB can really boost the export of most commodities, but the elasticity is small, all below 0.2%, that is, the depreciation of the real effective exchange rate of RMB 1%, which drives the export of related products to grow by no more than 0.2%.

At the same time, favorable devaluation may be hedged by factors such as customers' pressure reduction.

The depreciation of the RMB can increase profits for the enterprises in the hand stock order. But for subsequent orders, as a disadvantaged processing enterprise, the space generated by the depreciation of the exchange rate may be raised by foreign customers, and the cost of RMB depreciation will be pferred to domestic enterprises by lowering the price.

Therefore, the contribution of depreciation to profits will be weakened.