The impact of foreign currency depreciation on imports and exports, and the effect of currency depre

In international finance, "if a country depreciates its foreign currency" and "foreign exchange depreciation" both indicate the depreciation of its own currency, but the expression is different.

The depreciation of the local currency has an impact on import and export earnings. The depreciation of a country's currency reduces the value of its own goods relative to foreign products, so that foreign people increase their demand for domestic products, and their residents reduce their demand for foreign products, which is conducive to its own exports and reduces imports; The relative increase in the purchasing power of foreign currencies and the relative inertia of depreciation of domestic goods, services, transportation, accommodation and other expenses are conducive to attracting foreign tourists, expanding the development of tourism, and promoting the increase of employment and national income.

The depreciation of the local currency also has an impact on international capital flows. If the depreciation trend continues, people will move money from their home countries to other countries, causing capital outflows.

In order to improve the balance of payments, currency depreciation must have the existence of idle resources, and only when there are idle resources, after the devaluation, idle resources flow into exports, product production departments, and exports can be expanded. Second, export expansion leads to the growth of national income, and depreciation can ultimately improve the balance of payments, and the marginal absorption propensity should be less than 100%, so that the increase in national income during depreciation will be greater than the total absorption, and the balance of payments can be improved. The absorption analysis method also puts forward its own policy matching scheme to solve the problem of imbalance in the balance of payments, such as the existence of idle resources, the use of currency depreciation policy and expansionary fiscal and monetary policy collocation, if there is no idle resources, the use of currency depreciation policy and contractionary fiscal and monetary policy collocation, the method of currency depreciation to improve the balance of payments.

The principle of absorption analysis tells us that the existence of idle resources is an important condition for currency depreciation to improve the balance of payments, but analyzing the actual situation of exchange rate depreciation countries, especially Southeast Asian countries, in recent years, the "bottleneck" effect of capital shortage is an important reason for the failure of the balance of payments effect of currency depreciation. Although in the financial crisis, along with the exchange rate, the production recession caused by the unemployment of workers, but at the same time as the exchange rate ** appeared a large amount of capital outflow, idle labor resources and capital shortage coexisted, the shortage of capital limited the use of idle resources, and could not form a new production capacity to increase national income, at the same time, the total absorption formed by consumption and investment should be tightened but difficult to reduce, it is difficult to ensure that the marginal absorption tendency is less than 100%, therefore, despite the currency depreciation, it is not possible to improve the balance of payments.

If a country's currency depreciates, the country's exports will increase.

The reason is that the depreciation of a country's currency relative to the currency of other countries will decline when denominated in foreign currencies under the condition that the product is unchanged in its own country, and it will be more competitive than the same product abroad. As a result, international market demand will rise, which in turn will lead to an increase in domestic exports.

After the currency depreciation, because the export goods ** are determined in advance, the exporter will definitely suffer losses, but foreign buyers will increase their purchases, and the ** imported goods are determined by foreign countries, and they must pay more when buying, so the depreciation is conducive to exports and is not conducive to imports.

Effect of currency depreciation on exports As a domestically produced export product, the cost of production is affected by the raw material**, and the commodity ** (local currency**) expressed in the local currency is affected by the domestic value of the local currency. In different cases, exchange rate declines have different effects on exports** and foreign currencies** (agricultural products denominated in foreign currencies**) of exports, and thus on exports**.

The impact of currency depreciation on imports Changes in the relative nature of imports and exports. Imported goods are produced in foreign countries, and their foreign currency** will not change due to changes in the exchange rate of other countries. The decline in the exchange rate of the local currency will depreciate the local currency, and the conversion of the foreign currency** of imported goods into local currency will increase the number of goods** expressed in the local currency, resulting in a decrease in imported goods.

The depreciation of the renminbi has the following three effects:

1. Gross profit margin.

Export-oriented enterprises generally use the cost-plus method to confirm orders**, that is, the production cost is the base plus a certain reasonable gross profit margin level as the pricing benchmark. Since such export orders are usually denominated in US dollars, and upstream raw materials or components are usually procured domestically, exchange rate fluctuations will also have a certain impact on the gross profit margin for the current period assuming that other influencing factors remain unchanged.

2. Increased revenue recognition.

The export business of household appliances usually chooses to use US dollars for settlement, and the revenue recognized in the accounting statement will increase accordingly during the RMB depreciation cycle. For example, if an order is priced at US$1 million, and if the exchange rate appreciates in RMB when the revenue is recognized, it means that the revenue recognized in the company's statement is 10,000 yuan respectively.

3. Exchange gains and losses.

Due to the different timing of the company's income and expenditure of foreign currency assets, the foreign currency assets on the books correspond to different amounts of RMB at different points in time, forming "exchange gains and losses" and thus affecting profits. If the enterprise hedges, it will be generated"Investment income"or"Fair value change gain or loss"The portion will be offset on the income statement"Exchange gains and losses"The specific amount depends on the hedging ratio.

The depreciation of the renminbi has a great impact on exporters, which means that the renminbi will buy a lot less foreign things.