The impact of RMB appreciation on processing trade in Zhejiang Province

The development of processing trade promotes the pace of domestic industrial restructuring and technological progress; solves the employment problem of many laborers; and trains and creates a large number of technical and management talents.

1. But China's processing trade enterprises in the globalization of the industry chain occupies a lower position, low profitability, this trade structure is very susceptible to exchange rate changes. With the appreciation of the RMB, the advantage of China's human capital is gradually offset, the cost of goods increased, if the international market price of export commodities remain unchanged, then the decline in the export profits of enterprises will seriously affect the enthusiasm of exporters, and exporters, if in order to maintain the profits of the price increase, the international competitiveness of export products is bound to be seriously weakened, which is very unfavorable to the expansion of China's exports and products in the international market This is very unfavorable to the expansion of China's exports and products in the international market share.

2. When the RMB appreciates, the price of non-tradable goods will rise with the appreciation of the local currency, and the cost of foreign investment in China to build factories increases, thus losing the advantage of human capital in China to a certain extent, so the multinational corporations in pursuit of profit maximization will reduce direct investment in China. At the same time, the greater the proportion of FDI to non-tradable inputs, the more serious the reduction of FDI caused by the appreciation of the local currency.

3. With the appreciation of the yuan, foreign investment in China to increase the cost of their investment in China to reduce, will inevitably cause a rapid increase in China's effective labor supply, and economic growth is not enough to eliminate this pressure, the slow growth of wages will accelerate China's deflation to the warning line [5].

4. With the appreciation of the renminbi and the continuous development of foreign-invested enterprise operations, foreign capital profit repatriation requirements continue to increase, the appreciation of the renminbi so that the foreign exchange earnings of its profits, resulting in the expansion of the scale of capital outflow. This will affect the scale of foreign-invested enterprise investment and profit reinvestment and the degree of industrial localization, the balance of payments pressure, hindering the development of China's processing trade industry, but also weakened the processing trade to maintain China's balance of payments ability.