The Exchange Rate On The Globalization Of Labor

In the post-crisis era, developed countries'economic recovery slowly while China develop fast,and continue to maintain trade surpluses.So the global economic imbalances still exist, developed countries increased the pressure on RMB appreciation.Most scholars discussed RMB exchange rate only compared with developed countries'currencies, while ignoring China is a developing country, RMB exchange rate need maintain a competitive equilibrium with developing countries in the context of globalization of labor.In order to evaluate the level of the RMB exchange rate objectively, based on unit labor cost index (Unit Labor Cost, ULC), this paper estimates real effective exchange (REER1) of China and four ASEAN countries using the developed countries as sample,and another five real effective exchange (REER2) using developing countries during 1993 to 2009. Then we test income flexibility, exchange rate flexibility and substitution effects of Chinese total export and seven kinds of labor-intensive products'export using panel data.The results show there is systematic underestimation of the East Asian currencies because of developed countries'lower labor productivity growth and higher wages growth rate.Chinese currency devalued lightest,about 22.63 percent compared with that of 1994 year while ASEAN devalued as much as 60%; Meanwhile,chinese currency sharp appreciated to competitive developing countries,rising about 480.03 percent because of four countries'high growth rate of labor productivity, low wage growth and undervalued exchange rate.The empirical test shows that trading partner'income effect chinese export most between the main affect factor;There is substition effect on Chinese export if RMB appreciate to ASEN'currencies,but the effect much littler than income effect; The export has positive effect of exchange rate flexibility indicating Chinese export competitiveness against the developed countries has nothing with RMB appreciation. The three characteristics of China's exports explained the mystery of China's exports rosing rapidly. Last,Chinese labor intensive products has lower income effect and higher substitution effect than total exports indicating labor-intensive's product face with more intense competition.The above conclusions reflects that China is a responsible country who effort to stabilize the global economy. It is an irresponsible behavior of ignoring develop power of developing countries to demand RMB to appreciate only because of its relative devaluation to the currencies of the developed countries.However, as more developing countries are being integrated into the process of globalization,China can not and should not participate in international competition by low the exchange rate and low wages.Therefore, promoting industrial upgrading, improving our industrial layout, promoting regional internationalization of RMB, and leading a collective appreciation of East Asian currencies, will be the RMB exchange rate an important policy point.