On the evening of July 2 1, 2005, the People's Bank of China suddenly announced that the RMB exchange rate was no longer pegged to the single dollar and began to implement a managed floating exchange rate system. RMB appreciated by 2% and USD 1:8. 1 1. The appreciation of RMB has finally turned from expectation to reality. Exchange rate changes will have an important impact on the operation of the whole national economy, mainly through the prices of import and export commodities and the pricing of service commodities. After the appreciation of RMB, the actual purchasing power of RMB in the international market has been improved, and the import volume has increased. At the same time, the price of goods exported by China to the international market will increase, and the export volume will decrease accordingly.
Short-term impact of appreciation on agricultural development
The impact of RMB appreciation on agricultural development is mainly manifested in the following aspects: the import and export of agricultural products, the import and export of agricultural means of production, the utilization of agricultural foreign capital, the total output of agricultural products and their production costs, the income and welfare level of rural areas, the production structure and regional layout of agriculture.
(A) the impact on agricultural trade
First of all, the appreciation of the renminbi leads to an increase in imports of agricultural products and a decrease in exports. Bulk agricultural products, such as wheat, corn, soybeans, barley and other land-intensive products, are not affected by relatively small export volume and tariff quota restrictions. In addition, due to the price difference between domestic and foreign markets, the import volume will not suddenly increase sharply after the appreciation of RMB, and the impact on the domestic market will not be great; In China's agricultural exports, labor-intensive products such as vegetables, aquatic products and livestock products account for 56.6% of China's total agricultural exports. The appreciation of RMB still has some negative effects, but because of the low labor cost in China, the export obstacles of these products in the international market are more green barriers than price issues.
Considering the demand elasticity and characteristics of various agricultural products, for every appreciation of RMB 10%, the growth rate of China's agricultural products exports will decrease by at least 10.9%, while the growth rate of imported foreign agricultural products will increase by at least 13.5~ 16.3%. Because the demand elasticity and supply elasticity of various agricultural products are different, the degree of influence is also different. For every appreciation of RMB 10%, the export of grain, soybean and vegetable decreased by about 10.84%, 20.8% and 2.6% respectively.
Secondly, after the appreciation of RMB, the price of agricultural products will fall under the double squeeze of increasing supply and decreasing demand. This will reduce farmers' income. But for a long time, the commercialization rate of agricultural products in China is low, and the appreciation of RMB will definitely have an impact on the prices of agricultural products in China, but this impact is limited.
(b) Impact on trade in agricultural means of production
First of all, it is reflected in the import and export quantity of agricultural means of production. Generally speaking, it is beneficial to import and unfavorable to export. China's fertilizer tariff quota management system will not be abolished until 2008. In 2005, the varieties of chemical fertilizers subject to quota management were urea, diammonium phosphate and compound fertilizer. The import tariff rate of fertilizer within the quota is 4%, and the import tariff rate of fertilizer outside the quota is 50%. Although fertilizer imports are controlled by tariff quotas, after the appreciation of RMB, China's fertilizer imports will continue to increase, and at the same time, it will effectively curb exports.
Secondly, under the joint action of supply and demand, the prices of agricultural means of production will fall. At present, China is still a big exporter of chemical fertilizers. The appreciation of RMB is conducive to improving the purchasing power of RMB in the international market, and the import volume will increase. Coupled with the inhibitory effect on fertilizer exports, the supply of domestic fertilizer market will increase rapidly because of the appreciation of RMB, and the market price will also drop accordingly. In addition, the appreciation of RMB can reduce the production cost of chemical fertilizer industry, increase the output of chemical fertilizer by importing cheaper and practical production equipment and low-cost materials, thus reducing the domestic market price of chemical fertilizer.
Long-term impact of appreciation on agricultural development
With the rapid development of China's economy and the deepening of its dependence on foreign countries, it can be predicted that the RMB will continue to appreciate. In the long run, the appreciation of RMB will increase farmers' welfare and make them realize the benefits brought by economic development. At the same time, by vigorously developing China's labor-intensive industries with comparative advantages, it can also provide more employment opportunities for farmers. For the development of agriculture itself, the most important long-term impact of RMB appreciation lies in two aspects: production efficiency and industrial structure.
First of all, with the continuous appreciation of RMB, domestic enterprises and individuals can import more advanced equipment and technology at low prices, which can significantly improve the efficiency of agricultural production and the quality of agricultural products in China. On the one hand, it can improve the competitiveness of China's agricultural products in the international market and make up for the negative impact of rising prices; On the other hand, we can achieve various inspection and quarantine standards formulated by developed countries through the improvement of quality, thus avoiding various green barriers and increasing the export volume of agricultural products in China.
Secondly, the appreciation of RMB can promote the adjustment of agricultural industrial structure, optimize the regional distribution of agricultural products, and further give play to China's comparative advantages. With the appreciation of RMB, the planting area of resource-intensive agricultural products such as wheat, corn and soybean will decrease, and labor-intensive products such as livestock products, aquatic products and vegetables will develop rapidly, especially in the external environment where RMB continues to appreciate, the process of agricultural industrial structure transformation will accelerate.
In short, in the long run, the appreciation of RMB will change the international trade environment of agricultural products, forcing agricultural products processing enterprises and farmers to adjust their industrial structure and adopt advanced technology and equipment, thus improving the international competitiveness of agricultural products. Moreover, with the development of economy, domestic agricultural products processing enterprises must change the dumping strategy of low-price and low-quality agricultural products in the international market and implement a new competitive strategy of high-price and high-quality, which not only adapts to the development trend of international trade, but also is conducive to the upgrading of China's industrial structure.
Conclusions and policy recommendations
With the rapid and healthy development of a country's economy, its currency appreciation is inevitable. Faced with the negative impact of currency appreciation on agriculture and rural economic development, different countries have taken different remedial measures. Developed countries often adopt tax reduction, subsidies and price support policies because of their strong financial resources, but their costs are very high, and it is difficult for ordinary developing countries to bear such high costs. In the near future, the appreciation of RMB will have a certain negative impact on the development of agriculture in China, and China should take appropriate measures according to its national conditions to maintain the healthy development of agriculture. Specific measures mainly include:
First of all, the RMB should appreciate gradually and in stages. In order to reduce the impact of RMB appreciation on agriculture, the state must adopt a gradual and phased appreciation strategy, step by step and gradually appreciate, give farmers more breathing time, maintain the stability of agricultural production, and thus promote the healthy development of agriculture.
Secondly, under the framework of WTO, our government should improve and increase the state subsidy policy for agriculture. Considering China's national conditions with a large population and a small land, only by increasing support for agriculture can we narrow the price difference between domestic and foreign agricultural products, especially resource-intensive products, and safeguard national food security. At present, the specific policies that should be adopted mainly include: increasing the state's direct subsidies for farmers to grow grain, reducing farmers' taxes and fees, perfecting the state policy of purchasing grain at protective prices, and implementing certain export subsidies and price support policies for agricultural products.
Finally, accelerate the popularization and innovation of agricultural technology, reduce the cost of agricultural production and improve the international competitiveness of agriculture. At present, the production cost of agricultural products in China has approached or even surpassed that of foreign agricultural products. Under the background of RMB appreciation, China can buy more advanced and practical agricultural technologies in the international market and increase its promotion. In this way, the production cost of agricultural products in China will be greatly reduced, and the production efficiency and economic benefits of agriculture will be improved. In addition, the market demand at home and abroad is decreasing, and both agricultural products processing enterprises and individual farmers must introduce and develop more advanced technologies to improve the quality of agricultural products. Therefore, the state should increase capital investment in agricultural technology research and extension, reform the agricultural technology research and extension system, and accelerate the transformation of advanced science and technology.
From the above analysis, we can draw a conclusion that in the near future, the appreciation of RMB will increase the supply of agricultural products in the domestic market and reduce the price, which will make it more difficult to sell agricultural products and affect farmers' enthusiasm for developing agriculture. In addition, the supply of agricultural means of production will also increase and the price will also decrease. However, due to the tariff quota system of chemical fertilizers and the high international oil price, there is limited room for fertilizer price reduction. Therefore, in the near future, the impact of RMB appreciation on China's agricultural development will do more harm than good. It is necessary for the state to take corresponding measures to make up for the losses of farmers.
In the long run, the appreciation of RMB will promote agricultural products processing enterprises and farmers to take measures to improve the competitiveness of agricultural products in the international market. At the same time, it can also optimize the agricultural industrial structure and regional layout. Therefore, on the whole, the appreciation of RMB is only 2%, which has little impact on the overall agriculture in China. However, in the near future, the state must take measures to help farmers tide over temporary difficulties, which mainly include: gradual and phased appreciation of the renminbi; Under the framework of WTO, increase various subsidies to agriculture; Accelerate the innovation and popularization of agricultural science and technology and reduce the cost of agricultural production. Only when the state takes certain preferential measures can the appreciation of RMB finally promote the development of agriculture.