China's International Trade Of Agricultural Products And The Revaluation Of The RMB Through Classification And Structure

Agriculture is the basic industry of a country. As a large agricultural country and having the largest population of peasantry in the world, China must pay more attention on agricultural issues. Above all, the most important problem is the international trade of agricultural products.The PBC announced to adjust the exchange rate system on July 21, 2005. By March 12, 2007, the accumulated appreciation of RMB against dollar had increased to 4.7%. There are indications that the renminbi may keep on appreciating. Faced with the pressure of RMB's appreciation, the international trade will be affected first. How would the appreciation of RMB impact on China's agricultural trade balance? According to common sense, the continuing appreciation of the renminbi would lead to a serial of problems, such as an increase in imports and the reduction of exports on farm produce, deteriorate the international trade situation of agricultural products, embarrass the development of China's agriculture, decrease the farmers' income, pose a threat to the country's food security.There are many researches on the influence of exchange rate on the agricultural products imports and exports, of which mostly on the gross point of view and measure with the Marshall-Lerner condition. The fluctuations of domestic currency will have a more significant impact on balance of trade if the gross absolute value of the imports flexibility and the exports flexibility is larger than one, otherwise it would not be obvious. However, the flexibilities of each type of agricultural products are different. As a part of research, this issue has calculated that the flexibility of live animals and animal products is not accord with the Marshall-Lerner condition, but the Plant products, Animal and Vegetable Oil, Fats and Waxes, Refined Edible Oils and Fats, Foods, Beverages, Liquor and Vinegar, Tobacco and Tobacco Substitutes. The last two have greater flexibility, for which the appreciation of RMB would significantly affect its trade balance and reduce the surplus or expand the deficit.The percentage of the each kind in the imports and exports of agricultural products has been changing since 1978. The percentage of Live animals and animal products rose at first and then dropped, on the other way the percentage of plant products dropped at first and then rose up. The percentage of Animal and Vegetable Oil, Fats and Waxes, Refined Edible Oils and Fats are so small that can nearly do nothing to the gross balance of agriculture products trade. The changes in Foods, Beverages, Liquor and Vinegar, Tobacco and Tobacco Substitutes are basically at the state of decline. Therefore, as a simple analysis, the flexibility of exchange rate of imports and exports on agricultural products in China is not fixed but changes along with the change of agricultural structure. So it's not appropriate to analyze the flexibility on the total imports and exports of agricultural products as a single variable. It premised an assumption that the elasticity of the imports and exports of agricultural products remains constant. As a result, it is not properly to show the reality of trade on agricultural products. Based on it, the method in which analyses the impact of RMB revaluation on international trade need for further discussion again as it ignores the changes in the structure of agricultural trade. Besides, as the flexibility of different types of agricultural products are different, if the RMB appreciates, it will affect on the structure of agricultural imports and exports, afterwards impact the development of agricultural industry.As a result, this study will classify agricultural products on the sub-category, analyses the flexibility in each category. Then combine with the dynamic development of trade in agricultural products on time trends to test the total impacts of the appreciation of the RMB on imports and exports of agricultural products. And then, it will forecasts the changes on trade structure. It would be more convincing in theory. This is the significance of this theory.After empirical analysis has come to the following conclusions : If there is an appreciation of the renminbi, on the aspect of China's agricultural products, there will be greater impacts on primary agricultural products than that of processing and packaging of agricultural products; will be hurt by the large number of large enterprises in the processing of agricultural products. From the classification the impact of appreciation on animal husbandry and sugar, grain crops grown industries, will be softly and smoothly, and of fruits, vegetables, water fishing and seafood processing, oil crop cultivation and processing enterprises. will be a serious blow.To deal with the problem, the government should give special support to agricultural products processing enterprises, especially small and medium-sized agricultural products processing enterprises, greater flexibility for certain industries to increase investment, readjust and optimize the structure of agricultural produce, agricultural exports to search for a new edge, and strive to achieve economies of scale and industrialization.