Study On The Influence Of RMB Appreciation On Endurance Capacity Of Chinese Enterprises

With reforming of the RMB exchange rate formation mechanism, the RMB appreciation pressure still exists. Actual economic data show that, the RMB appreciation has made some negative impacts on Chinese enterprise endurance capacity. Based on the perspective of firm heterogeneity, employing sales profit ratio and total profit as the proxy variable of enterprise endurance capacity, employing 572 listed companies’ data set from 2005 Q3-2013 Q3,this paper sets up a panel data fixed effect changeable intercept model to empirically study the influence of short-term RMB appreciation and RMB exchange rate volatility on enterprise endurance capacity in China. Finally, based on the empirical results, some policy recommendations are put forward for enterprise decision-makers to well deal with the continuing RMB appreciation and RMB exchange rate fluctuations.The empirical results based on firm heterogeneity perspective shows: In our total study sample period, RMB appreciation does have made a significant negative impact on Chinese enterprises; one percent appreciation of the RMB, the sales profit ratio would decrease by 1.47% while the RMB exchange rate volatility makes a little impact. For characteristics of enterprise location: the endurance capacity in coastal area enterprises are stronger than that in inland ones, one percent appreciation of the RMB will cause the reduced profit margins in coastal and inland enterprises of 1.21% and 1.45% respectively. For types of enterprise ownership: the endurance capacity to withstand the RMB appreciation of state-owned enterprises are weaker than private enterprises, and the estimated coefficients are-1.70 and-1.11.For characteristics of enterprise products: labor-intensive enterprises suffer the biggest impact, and the exchange rate flexibility is-1.82; resource-intensive 、 capital-intensive and technology-intensive enterprise also affected by exchange rate appreciation, and the estimated coefficients are-1.33,-0.99 and-1.14. For the enterprise scale; large-size enterprises can withstand exchange rate changes stronger than middle-size and small-size enterprises, and the estimated flexibility are-1.11 、-1.49and-1.15.In the sub-sample period, there shows significant difference between the RMB appreciation and exchange rate volatility on enterprises. Between the period of the continuing recovering of economy and the second exchange rate reforming, the currency of RMB appreciates fiercely and the exchange rate volatility strengthens, and just at that time, the RMB appreciation made a quite significant negative impact on firms’ sales profit rate, but the exchange rate volatility turns to be positive. As the result shows, one percent of the RMB appreciation and exchange rate volatility would respectively lead to 2.15% decreasing and 0.15% increasing of the firms’ sales profit rate.Empirical results of Guangdong Province to form the demonstration effect shows: the coefficient of RMB appreciation affects the enterprise endurance capacity of Guangdong Province is-1.56; from the perspective of region heterogeneity, the RMB appreciation affects most on the Pearl River Delta area, the estimated coefficient is-0.49; followed the eastern area and the estimated coefficient is-0.37; while the RMB appreciation turned out to be positive to enterprises in the western area and the estimated coefficient is 1.15; finally, the RMB appreciation affects little on enterprises in the northern area for the estimated coefficient is not significant.