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Impact of RMB depreciation

Views: 360     Author: Leland Huang     Publish Time: 2022-11-21      Origin: Site

Impact of RMB depreciation

Impact of RMB depreciation


1. Imports will decrease:


Companies that focus on imports will have lower profits, because when importing goods, they need to convert RMB into US dollars and other foreign currencies at the bank counter first, and then purchase goods from abroad.


After the devaluation of the RMB, the same RMB will get less and less dollars and buy fewer goods, which will increase the import cost and reduce the competitiveness of imported products.


2. Exports will increase:


Export oriented companies will increase their profits. After the devaluation of the RMB, more RMB can be exchanged from the bank for dollars received from export goods, which will increase their profits.


Therefore, the essence of the continuous devaluation of the RMB exchange rate should be that export companies subsidize and assist these enterprises in exporting, which is beneficial to protecting low-end industries and backward production capacity, but will increase industrial pollution and damage the ecological environment, which is not conducive to national industrial restructuring and industrial upgrading.


3. Increase employment:


After the devaluation of the RMB, the reduction of imports has reduced the competition in China's sales market, increased the sales of domestic goods, and increased employment opportunities; Because of the increase in exports, the profits of export enterprises will increase and employment will also increase.


4. Increased import costs:


As a result, the prices of production, manufacturing and consumer goods soar, and the exchange rate of RMB depreciates, the prices of imported products in China will also rise, and the overall price level will rise.


Over the years, China needs to import a large number of production, manufacturing and consumer goods such as oil, iron ore, timber, soybeans and grain, which are all settled in dollars. If the RMB continues to depreciate, the import price of these commodities will rise, which will increase the cost of the overall industrial chain.


5. Impact on the stock market:


The impact of the devaluation of the RMB on the stock market is complex. The devaluation of the RMB will improve the competitiveness of the country's products, especially the export companies will benefit, while the cost of relying on the import companies will also increase, and the profits will be lost, which will have a negative impact on small and medium-sized import enterprises. The net profits of enterprises will also be reduced accordingly, and the stock prices will also be affected.


6. Impact on gold price and international commodity price:


Gold and international bulk commodities are priced in US dollars. The devaluation of the RMB is equivalent to the appreciation of the US dollar, as well as the rise in the price of gold and international bulk commodities. Therefore, when the RMB devalues, it is necessary to hold and buy hard currencies such as gold.


To sum up, you will find that it is actually what we usually say "money is less and less valuable". The same 100 yuan can now buy fewer and fewer goods. As the price level is rising, your property has not changed. In other words, when you do not let your existing assets appreciate, your money has depreciated, which is the value of investment and financing


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