European debt crisis impact on Chinese exports total controllable

Although there are 75 million euros rescue plan, but Greece and other countries strikes indicates PIIGS (Portugal, Italy, Ireland, Greece, Spain five) national revival of financial shortage, dragged down to consensus is constantly breaking-down in euro. Considering that Europe is China's largest export market, the market worried continued devaluation of the euro may be China's exports to the European cause greater impact.

"Our analysis shows that the Renminbi depreciation against the euro rises and approximately 3 months after Chinese exports to the eurozone growth trend has very good consistency. If the RMB against the euro continued to more substantial appreciation, to have significant negative effects on exports. Historical experience shows that the future appreciation of RMB against the euro annualised rate remained at 10%, China on euro area exports, year on year growth rate will drop to single digits, affect the overall controllability ".

This is an industrial bank Senior Economist Dr. Lu political reporters point of view.

Stir the euro exchange rate decline PIIGS China's second largest export market in the euro area involvement

European sovereign debt crisis erupted, the EUR/USD exchange rate has dropped considerably. May 24, EUR/USD exchange rate compared to 1.2495 on 1 January 1999 the euro officially started peaked 1.5991, 28.0% devaluation.

In the euro against the US dollar exchange rate depreciated at the same time, the Renminbi exchange rate against the euro also appear almost entirely almost equal amplitude changes. May 21st annual RMB against the euro compared to the calculated appreciation 10.0%, and the appreciation of the US dollar against the euro on the day of 10.5% similar.

In fact, PIIGS as a whole, the proportion of China's total exports a maximum 2.5% in March, it had declined to share than 1.8%. One of Greece's total share of China's exports accounted for only 0.06%.

But robust political Commissar believes that consider the crisis has made euro PIIGS continued to break bits fall on Chinese exports more comprehensive assessment, you may need to be on the euro area.

Data show that had previously been occupied the largest export market position of the United States, and in 2007 was replaced with the current EU EU accounted for approximately 20% of China's exports. But if in the euro area and non-EU as the principal, the share of China's export market is about 14% to 16%, lower than the current United States by 17% to 20%, the United States has become China's largest export market. The third and fourth ASEAN and Japan, accounting for China's exports are currently ASEAN at 8% to 10%, and Japan in 8% to 9%.

From euro exchange rate fluctuations in the euro area of China on export

Robust political Commissar told reporters, given other conditions remain unchanged, the exchange rate change by changing the import and export of local currency price level of products that have a direct impact on export.

According to bis effective exchange rate indices, get RMB effective exchange rate index, the devaluation of the amplitude, rise and China's exports increase close relationship between the reverse. This displays the month effective exchange rate change will significantly affect approximately 3 months after the export growth rate.

Considering the past RMB against the euro exchange rate overall volatile, even according to the average monthly exchange rate year on year, depreciation of 10% at up to 25% are not uncommon. Such changes significantly if the duration is very short, little impact; but if the l-direction more substantial change in the depreciation of the duration is longer, you will be on China to significantly affect European exports.

Robust political Commissar, approximate, if future appreciation of RMB against the euro by annualised "sustain" at around 10%, Chinese exports to the eurozone will be year on year growth rate dropped to single digits; if the appreciation of the magnitude of the "sustainability" in 10% to 20% against the euro area exports appears a number of negative growth; if the appreciation of the magnitude of the "sustainability" in 20% to 30%, exports may appear two-digit negative growth.

Visible, if the worst case scenario, assume that the euro in June were demoted to the inception of the lowest level against the US dollar, the RMB will 0.8272 need rapid appreciation of the euro; assuming 0.8272 41.0% levels in the next 18 months by BP (BasePoint basis points) achieve uniform the Renminbi depreciation, the average monthly exchange rates against the euro appreciation rate, will be less than 20% to 30% of all exports to China have a greater impact. If in the next 18 months the euro 1.1 to 1.2, and current market forecast this possible from low bit is 1.2, the Renminbi appreciation against the euro account range of 9% to 13%, on the impact of Chinese exports will be controlled.

Robust political Commissar said that most likely should be the latter.

Missed opportunities for the future, perhaps after pressure greater

At present the market with a view: as European sovereign debt crises increased Chinese exports and economic growth of uncertainty, previously had planned to restart Exchange rate reform should be postponed.

On this, that this point of view, Political Commissar of questionable: restart Exchange rate regime and is not equal to the dollar. We previously had stressed that the current exchange rate back toward more flexible, taking into account the prior of the Renminbi against the US dollar exchange rate has been underestimated, short term renminbi against the US dollar has been the lack of continuing significant trend appreciation space, therefore, the policy focus should be committed to the Renminbi exchange rate regime, the cultivation of exchange rate hedging market, ultimate for RMB freely floating, and internationalization.

Take account of the euro area, the proportion of Chinese export market is about 14% to 16%, if the trade-weighted to determine the currency basket, faced with the sharp depreciation of the euro, obviously does not mean that the appreciation of the Renminbi against the US dollar, which is inevitably may also appear certain level of depreciation. So, after foreign influence on Chinese exports of controlled.

In addition, Political Commissar of stress that you do not change, the pressure will be greater after. Rebalancing, deficit, has become the United States in the exchange rate of the maximum number of repeated pressure

Excuse. Past experience shows that once the crisis was over, the global economy at the end of the second approach, the US worries subsided on China's economy strong growth in demand will decline, at which point the Renminbi exchange rate will be once again return to the game, and even in the United States in the Western economy, game stage, central axis. To do this, when the pressure is temporarily gone abroad, we should set policy to actively promote the exchange rate regime, or they may wait for a more passive.

Renminbi depreciation against the euro rises and approximately 3 months after Chinese exports to the eurozone growth trend has very good consistency. If the RMB against the euro continued to more substantial appreciation, to have significant negative effects on exports. Historical experience shows that the future appreciation of RMB against the euro annualised rate remained at 10%, China on euro area exports, year on year growth rate will drop to single digits, affect the overall controllability.