Appreciation Of The Renminbi Will Make Imports More Expensive.

A spokesman for the people's Bank of China issued a statement on 19 July, saying it would further promote the reform of the RMB exchange rate formation mechanism and enhance the exchange rate flexibility of the RMB. Analysts pointed out that China's expansion of exchange rate flexibility, if RMB appreciation, will support the import of international commodity prices, but will suppress domestic export products.

If the renminbi appreciates, it will reduce the import cost of China's commodities from grain to copper and enhance its purchasing power in the international market. If it is converted to the increase in actual imports, it will support international commodity prices.

Imported commodities, such as copper and crude oil, will benefit from it.

If RMB appreciates, it will provide an opportunity for importers to import at a low price.

It is not ruled out that enterprises will use the parity to reduce import volume in a certain period of time, thereby promoting the international commodity prices in stages.

According to the Research Report of Nanhua Futures Company, RMB appreciation is positively related to commodities in general, and the correlation from strong to weak is metal, chemical, energy and agriculture in turn.

Specific to all varieties, the strongest correlation with RMB appreciation is gold and copper. It is not difficult to find that these varieties are mainly imported in China.

However, there are also varieties that are negatively related to the renminbi. In line with the correlation strength, they are wire, thread and strong wheat, which are mainly exported.

The appreciation of RMB will bring pressure to China's labor-intensive export enterprises, such as negative impact on the export of labour intensive industries such as clothing and furniture manufacturing.

At present, the average net profit margin of China's entire textile industry is 3%-4%.

If the renminbi appreciated by more than 5 points, more than half of the domestic enterprises would collapse.

For cotton, if the textile industry in the appreciation of the renminbi after a large number of orders loss, the price of cotton will be suppressed.

If the RMB appreciates, the reaction of two domestic and foreign markets will be different.

Domestic export commodities, such as aluminum, will be suppressed.

China is the largest consumer of metals in the world, and the demand for iron ore, copper and other metals and crude oil has increased significantly with the strong economic recovery.

At present, the international commodity prices have rebounded sharply, and driven the rapid rise of domestic PPI (manufactured goods prices), and the CPI (consumer price index) increase has reached 3% of the psychological barrier.

By reducing the relative price of imported goods, curbing the inflationary pressure generated by the rise of international energy and commodity prices, reducing domestic inflation and reducing the possibility of greater monetary tightening measures.

It needs to be emphasized that the change of the RMB exchange rate is only the ratio between domestic price and international price, and the trend of commodity price marked by two currencies will not deviate from each other.

If dollar denominated goods continue to rise, domestic prices will follow suit as China still needs to import.

China is now a major buyer of bulk products, and strong demand may also push up prices again, ending the price advantage gained in the short term when the renminbi appreciates.

The impact of RMB exchange rate fluctuation on commodity prices will be limited to short-term or medium-term and will not have a decisive impact on the long-term trend of commodity markets.

In the context of China's macro economy, the appreciation of the renminbi and the macro-control policies will be conducive to the pformation of the mode of economic growth and the adjustment of the export structure of enterprises.