The Incompleteness And Asymmetry Of Exchange Rate Pass-through And Pricing To Market Ability

In recent years, China's economy developed dramatically and foreign trade export became one of the three carriages driving the development of China's economy forward. In 2009, China surpassed Germany becoming the largest exporter around the world.However, under the huge trade surplus, China also faces growing trade frictions and more and more countries require RMB to appreciate. The United States has published several documents to call for defining China as "exchange rate manipulator" and imposing punitive tariffs on the exports of China since March 2010. Under the huge external pressure, China restarted the RMB exchange rate reform in June this year.So far, the RMB exchange rate against the USD has appreciated by 3%.Therefore,study on the impact of exchange rate changes to the China's export have great practical value.From the study of exchange rate pass through to export price, we'll get PTM, then come to China's exports international competitiveness. The main approach is theoretical and empirical analysis. First, the concept of EPT and PTM were redefined. The relationship between EPT and PTM is opposite. Secondly, this paper analyzes the interaction mechanism of EPT's incompleteness and asymmetry with PTM. The PTM ability is the reason of EPT's incompleteness and asymmetry. Then, we established a partial equilibrium model under imperfect competition market structure aimed to measure the PTM ability of different regions and different industries. Empirical results show that the rate of exchange rate pass-through is different in different regions, different industries and different lags. The exporting manufacturing in Zhejiang and Guangdong is effected by exchange rate significantly and the overall rate of the export exchange rate pass-through (EPT) is between-1 to-0.5 in the two provinces, indicating that exporters undertake the majority cost caused by the variation of exchange rate and do not have the ability to control the price in the objective markets, which means that, the PTM ability is weak. Finally, this paper puts forward some politic suggestions.