The Influence of RMB Exchange Rate Change on Chinese Car Industry (Essay Sample)

The Influence of RMB Exchange Rate Change on Chinese Car Industry
A Thesis Presented to
In Fulfillment of the Requirements
for the Degree of Bachelor in Economics
© 2016
ALL RIGHTS RESERVED
APPROVED BY THE BUSINESS COLLEGE

Dean

Date
Pledge of Originality
I declare that this thesis paper is my own original work.
Signature: Yulou Yu
Date: May 5th, 2016
Table of Contents
Introduction
Background & Rationale of the Thesis Topic
Objective of Research
Approach and method
Automobile Industry in China
Overview
Import
Export
Analysis on automobile industry
Overview
“8” era
“7” era
“6” era
Key factors that affect RMB exchange rate
Interest rate
Inflation
China’s Current Account/Balance of Payments
Government Debt
Political Stability & Performance
Recession
Positive and negative impact of RMB exchange rate on car industry
The positive impact of the RMB exchange rate on car industry
The negative impact of the RMB exchange rate on car industry
Improving competitive advantages and overcoming obstacles in currency exchange rate
Taking advantage of weak currency value
Ways to reduce or cover exchange rate risk
Option
Forwards
Futures
Swap
Conclusion
ABSTRACT
The RMB exchange rates have both direct and indirect impacts on the auto industry. The influence of RMB exchange rate change on Chinese car industry is broad topic that has to be subdivided into other sub sections. One dominant aspect in the RMB exchange is the relationship between the imports and the exports and their influence in the Balance of payment. China’s currency has for long been devalued against the US dollar despite her economic prowess. The Chinese economist’s project that RMB has had direct impact on the motor industry of China and this has made it rise to her current state in the world market. This industry has for long been dominated by the Western countries alongside Japan. However, the progress of Chinese ventures in the world market can be linked directly to the influence of the RMB exchange rate. Recently, China has been in the lime light in the industry and is struggling to overdo the world leading producers and sellers of motor vehicles.The economy of China has been one of the fastest growing in the world. Foreign situation has been on the maintain the surplus situation
This research will address the major impact of the RMB exchange rates on the auto industry in China with regard to other countries. Automobile industry, as the column business in China, assumes an imperative part in both import and fare exchange and the national economy. It has turned into a center that the effect of the vacillation of RMB swapping scales to the improvement of vehicle industry.
KEY WORDS: China, RMB exchange, Automobile industry, business.

I: Introduction
With a background marked by more than a three millenniums, Chinese currency has been in use from time immemorial. Among the currencies that have been used by the Chinese is the Silver dollar. However, silver approved in worth, and it was quite difficult for China to hold more on the standard of Silver. In 1935, money known as FÇŽbì, came into existence and was officially used by the Chinese (Lee 44). The economy of China has been one of the fastest growing in the world. Foreign situation has been on the maintain the surplus situation. However, the reformation of the RMB exchange in import and export industry was experienced in the year 2005 and 2008. On July 21, 2005, People's Bank of China (PBC) declared the change of RMB conversion scale administration, which opened the prelude to the change of RMB swapping scale administration. From that point on, the vacillation range and the intricacy of the development component of RMB conversion scale expanded clearly, which has had certain effect on China's import and fare exchange and outside direct venture. Automobile industry, as the column business in China, assumes an imperative part in both import and fare exchange and the national economy. It has turned into a center that the effect of the vacillation of RMB swapping scales to the improvement of vehicle industry. From that point on, the vacillation range and the intricacy of the developmentcomponent of RMB conversion scale expanded clearly, which has had certain effect on China's import and fare exchange and outside direct venture. Automobile industry, as the column business in China, assumes an imperative part in both import and fare exchange and the nationaleconomy. It has turned into a center that the effect of the vacillation of RMB swapping scales to the improvement of vehicle industry.
1.1 Background and Rationale of the Thesis Topic
The influence of RMB exchange rate change on Chinese car industry has been a topic of research that has never been exhausted. The RMB exchange rate remains a center of discussion especially I n the international trade. China’s currency has for long been devalued against the US dollar despite her economic prowess. The Chinese economist’s project that RMB has had direct impact on the motor industry of China and this has made it rise to her current state in the world market. This industry has for long been dominated by the Western countries alongside Japan. However, the progress of Chinese ventures in the world market can be linked directly to the influence of the RMB exchange rate. Recently, China has been in the lime light in the industry and is struggling to overdo the world leading producers and sellers of motor vehicles.
This research aims at deliberating on the influences that RMB exchange rate has had on the Chinese car industry. The RMB exchange rate has had both positive and negative influences on the motor vehicle industry. There are also several elements that have impacted on the the RMB exchange rate. This paper seeks to explore all these elements.
1.2 Objectives of the Research
The objectives that drove impelled me to write these researches are both economic related. Below are the major objectives of the research.
Evaluate the impact of devaluation of currency on the world trade
To evaluate both subjective and objective impacts of China’s economic development and how these impacts can influence ones investment decisions.
To analyze the RMB rate in any business venture in China and how investors can make decisions based on this rate.
1.3 Approach and method
The research technique to be embraced in this examination is the quantitative research method since the paper is more worried with connections in the middle of variables and investigation of causal utilizing numerical information and measurements. The present study is developed through a model of relapse examination. There are essentially three stages that are important for any sort of quantitative exploration:
1. Determining the models or connections to be concentrated on
2. gathering the information expected to evaluate the models
3. Measuring the models with the information
The methods utilized as a part of the last step can widely vary starting with one teach then onto the next.
Thus, the method used in my research will make use of both quantitative and qualitative method at different stages. The mixed method is equally inevitable since different stages demand different methods.
II. Automobile Industry in China
2.1 Overview
Since the year 2008, car production within China’s territory has been one of the leading in the entire globe, quantified, via the car unit generation. The annual creation of vehicles in China surpasses that of the European Union as well as the cumulative aggregation of vehicles from both Japan and USA. The car industry in China can be fundamentally attributed to the Soviet roots chiefly. The establishment of major plants and authorized auto outline were majorly founded in the year between 1950 and 1960. However, these plants had lower volume of production in its initial three decades of early operations. The production was not able to surpass 100-200 thousand for each year. However, the industry has advanced very quickly with production in the year 1990s being very high. China's twelve-monthly vehicles generation limit initially surpassed one million in 1992. However, by the year 2000, as able to produce more vehicles than ever before, the production of vehicles on an annual basis was more than two million vehicles. After China's entrance into the World Trade Organization (WTO) one year after 2000, the advancement of the car showcase further quickened. Somewhere around 2002 and 2007, there was the development of the China's national. This development was slightly above by 21 percent, or one million vehicles year-on-year. In the year 2006, China's vehicle creation limit progressively surpassed six. The next was seven million, and when the year 2007 dawned, China delivered more than eight million vehicles. In the year 2009, China delivered over thirteen million autos, out of these, million were traveler autos and 3.41 million were those vehicles meant for commercial purposes, this was a bigger number and was above that of the the United States as the world's biggest car maker by quantity produced (Goldstein 04). In 2010, both deals and generation topped 18 million units, with 13.76 million traveler automobiles conveyed, for every situation the biggest by any state in account. In 2014, all out automobile creation in China achieved over 23 million, representing 26% of worldwide car production. The vast majority of the autos produced in China are consumed domestically, and the costs of these achieved 814,300 units in the 2011. China's local business sector gives its auto manufacturers a strong foundation and Chinese pecuniary organizers w...