*** Electromechanical companies under exchange rates

"The recent acceleration in the pace of RMB appreciation has been mainly driven by market forces," said Ding Zhijie, dean of the School of Finance at the University of International Business and Economics. According to data released recently, China’s trade surplus reached US$31.484 billion in July, the highest since February 2009, and exports reached US$175.13 billion in July. The monthly export scale has set a new record of US$161.97 billion that was just set last month. "The unexpected increase in the trade surplus and the strong rise in exports have shown that the foreign exchange market is characterized by ample foreign exchange and oversupply, which has contributed to the strengthening of the RMB exchange rate."

As we all know, people's non-appreciation can reduce the cost burden on imported energy and raw materials, and help promote the export of mechanical and electrical enterprises to improve the technical level, improve the quality of mechanical and electrical products, thereby promoting China's mechanical and electrical industry restructuring and improving China's status in the international division of labor. However, it will undoubtedly cause an impact on China’s export and electromechanical enterprises, especially labor-intensive electromechanical enterprises. Once the renminbi appreciates, in order to maintain the same renminbi price floor, the price of electromechanical export products in foreign currencies will increase, which will weaken its price competitiveness. However, if foreign currency prices of export products are to remain unchanged, they will inevitably squeeze the profitability of export enterprises. This cannot but impact export companies, especially labor-intensive ones. Ding Zhijie, Dean of the School of Finance at the University of Economics and Business, said that the appreciation of the renminbi would allow some inefficient companies to either exit the export market or increase production efficiency and improve the quality of export products, thus further enhancing market competitiveness.

Obviously, for the majority of electromechanical enterprises, the appreciation of the renminbi is also “several happy families”. The exchange rate of the renminbi has broken the 6.4 mark, and it is likely that the electromechanical industry will face a new round of reshuffle.

The author suggests that the vast majority of mechanical and electrical enterprises still relying on the advantages of the labor force, insisting on scientific and technological innovation, and increasing the value of their subsidiary products will be the long-term way out before they can persist in this ups and downs.