Analysis on the advantages and disadvantages of pa

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On July 21, the central bank officially announced that from now on, China will begin to implement a managed floating exchange rate system based on market supply and demand and with reference to a basket of currencies. At 19:00 on the 21st, the trading price of the US dollar against the RMB was adjusted to 8.11 yuan per US dollar. For more than a year, under the pressure of domestic and foreign markets, the dust has finally settled on the 2% appreciation of the RMB

with the appreciation of RMB, various industries will be happy and worried. The appreciation of RMB will have a negative impact on the listed companies that account for the majority of foreign exchange income and hold a large number of foreign currency assets due to exchange gains and losses, which will be beneficial to the listed companies that mainly import and hold foreign currency liabilities. The industries benefiting from the appreciation of RMB are aviation, paper industry, real estate... It can be seen that the appreciation of RMB is beneficial to the development of paper industry in general

the paper industry benefits from the appreciation of RMB

1. The appreciation of RMB can reduce the import cost of papermaking equipment. Due to the backward equipment of China's paper-making enterprises, they can't meet the technological requirements of high-grade paper production. In recent years, a large number of foreign production lines have been introduced to avoid rats biting wires. In 2004, the foreign exchange volume of China's imported paper-making equipment reached 1.388 billion US dollars. The appreciation of RMB will reduce the import cost of papermaking equipment, thus reducing production costs and financial expenses, and improving the profitability of enterprises

2. The import price pressure of pulp has eased due to the appreciation of RMB. It is reported that the zero tariff policy on pulp import, which began in 1999, has induced the international paper industry to shift to China. At the same time, due to the serious shortage of forest and wood resources in China, China's paper industry has been relying on the international pulp market for a long time

3. The appreciation of RMB will reduce the production costs of enterprises in the industry. Most of the raw materials needed by China's paper industry depend on imports. Since 2000, the adjustment of China's pulp structure has been further accelerated, and the proportion of waste pulp and wood pulp has been increasing. Among them, the import of waste pulp and imported wood pulp has the fastest growth, with a compound growth rate of 36.89% and 22.47% respectively. The forestry paper integration project being implemented is also difficult to be effective in the short term, so the raw materials of China's paper industry will still mainly rely on imports in the short term

4. RMB appreciation will not lead to a large influx of imported paper. As foreign paper-making enterprises have invested and built factories in China, the import volume of paper and paperboard has increased slowly, and its proportion in domestic paper consumption has decreased year by year. In 2004, China will promote the process of functionalization and high-performance of modified nylon. China's imported paper and paperboard showed a negative growth, down 3.31% from 2003. Because the RMB appreciation is small this time, the price of imported paper is generally more than 10% higher than that of overseas paper, and coated paper, paper and carton board are currently in the anti-dumping period, we believe that RMB appreciation will not lead to a large influx of imported paper

5. The appreciation of RMB will increase the profit of paper industry by 8.79%. If we only consider the impact of RMB appreciation on the cost of raw materials, the product sales cost of China's paper industry in 2004 was 171.591 billion yuan, of which the foreign exchange of imported raw materials was nearly 5.3 billion US dollars, equivalent to about 43.8 billion yuan. A 2% appreciation of the RMB can reduce the cost by 0.51%, increase the gross profit margin by 3.01%, and increase the total profit by 8.79%

6. RMB appreciation reduces the price of high-end paper products. The negative impact of RMB appreciation on paper prices is mainly reflected in the high-end paper market, especially for paper products that are not protected by anti-dumping. At present, there is still a big gap in the overall technical level of China's paper industry compared with foreign developed countries, and there are still certain limitations in the production scale and pollution control. Therefore, under the background of the improvement of consumption level, there has been a large gap between supply and demand in the high-end paper market, and the annual amount of imported paper products accounts for about 10% - 15% of the total domestic consumption. Previously, the domestic sales price of imported paper products was generally higher than that of similar paper products, but the appreciation of RMB will lead to the decline of its import price, which will have greater substitutability for domestic similar products, and the pressure on domestic similar products to reduce prices will therefore increase

7. Among the leading domestic papermaking enterprises, such as Chenming Paper and Huatai Co., Ltd., their high-grade paper and high-grade packaging paper have benefited significantly. It is estimated that in 2005, the cost of imported pulp of Chenming paper, Huatai Co., Ltd. and Bohui paper was 2.1 billion yuan, 900 million yuan and 500 million yuan respectively. The appreciation of RMB by 2% will increase the net profit by nearly 2%, and the earnings per share will increase by 0.01 yuan, 0.02 yuan and 0.01 yuan respectively

8. The appreciation of RMB has limited impact on the export of paper and paperboard. Due to the small export volume of China's paper and paperboard, the export volume of China's paper and paperboard was 1.25 million tons in 2004, accounting for only 2.5% of the output. Therefore, the impact of RMB appreciation on the export of paper and paperboard is limited

but there is a long way to go in the development of plastics. 9. The appreciation of the RMB, and the pulp prices in Taiwan and Southeast Asia remain stable. The RMB exchange rate reform has given some hope for the recovery of the price of China's pulp industry, but regular buyers in Asia believe that this adjustment is too moderate to stimulate strong demand. Therefore, they believe that this reform will have little impact on Taiwan and Southeast Asia

the appreciation brings negative effects, and the dependence on pulp import is "heating up"

according to statistics, in the first half of 2005, China imported 3.86 million tons of pulp, worth 1.88 billion US dollars, down 2.1% and 1.3% respectively over the same period last year (the same below). The average import price was 488 US dollars/ton, an increase of 0.8%. Some analysts pointed out that appreciation may also bring negative effects. The appreciation of RMB means that the domestic paper industry can import foreign high-quality pulp at a lower cost, which is bound to attract domestic enterprises to turn their "eyes" to the international market again, and the dependence on pulp import will "heat up" again, resulting in a reduction in the demand for domestic pulp by enterprises and a slowdown in the development of self-sufficiency in relevant domestic industries

information source: Huicong Baiyang

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