1) a stable exchange rate is conducive to the accounting of import and export trade costs and profits, and is conducive to the safety of import and export trade.
Row; Frequent exchange rate changes will increase foreign trade risks and affect the normal conduct of foreign trade.
2) If the local currency depreciates, the foreign exchange rate rises, and the purchasing power of foreign currency for domestic goods and services increases, it will generally increase the demand for domestic goods, thus expanding the export scale of domestic goods and facilitating exports. At the same time, the local currency exchange rate fell,
The price of imported goods expressed in local currency will increase, which will affect the sales of imported goods in the country and curb imports.
3) If the local currency appreciates and the foreign exchange rate declines, the price of export commodities expressed in foreign currency will increase, thus affecting the sales of export commodities abroad and inhibiting exports. At the same time, due to the rising exchange rate of the local currency, the purchasing power of the local currency for foreign goods and services will increase the demand for imported goods, which is conducive to imports.
4) The depreciation of the local currency needs to meet the conditions for improving the trade balance. First of all, the demand elasticity of import and export commodities should meet the Marshall-Lerner condition. Second, the quantity and structure of domestic total supply should meet the requirements of producing, exporting and importing substitutes. Third, China has idle resources, which can be used to produce export and import substitutes.
2. Adjustment of exchange rate to capital and financial accounts.
Physical market: devaluation of local currency can lead to long-term capital inflow, because domestic products are cheap.
Capital market: the depreciation of the local currency will make investors expect future appreciation and attract capital inflows.
Therefore, the exchange rate level is at the core and key low level in the balance of payments adjustment.