RMB Exchange Rate Changes On Central Region Industrial Structure Adjustment Effect Analysis

Since China began to establish a market-based and managed floating exchange rate system in July of2005, the exchange rate of RMB against the US dollar has appeared to rise comprehensively. After the exchange reform, the exchange rate between USD and RMB issued by the People’s Bank of China has increased from1:8.11to1:6.55on February8th,2011with the accumulative appreciation being19.2%. The significant change of the exchange rate between RMB and USD has directly affect the price level, the structure of import and export commodities as well as the domestic consumption and investment structure in China, thus affecting in the adjustment of industrial structure in the midland to some extent.First of all, this paper has studied and reviewed the related theoretical basis and literatures about on the exchange rate and industrial structure. Then, according to the relevant data about the industrial structure development in the central region, analyze the progress of industrial structure adjustment in the central region comprehensively, including the current situation, the analysis on adjustment range and effect. Secondly, the paper expounds to the impact of the exchange rate change on the industrial structure adjustment both from the external market and internal market demands with the price as the main line. In addition, relevant data is adopted to establish an empirical model, including the stationary test, co-integration test, and causality test and impulse analysis, and conducts empirical analysis of the impact of exchange rate changes on central region industrial structure adjustment. Finally, this paper tries to put forward relevant policy suggestions on the industrial structural adjustment in the central region based on theory and the empirical results.Analysis shows that the whole industry structure in the central region has experienced the process from stable development to large fluctuation and to smooth development, while the respective industrial structure variation and deviation of the changes in the six provinces in the midland are different in25years. From the affect path, when the exchange rate appreciates, relative to labor intensive products, technology and capital intensive products’ export volume increases, and limited resources and technology will flow from the second industry to the tertiary industry, thus industry efficiency improve. From the empirical analysis, the first industry and the tertiary industry of the central region and exchange rate fluctuations exist long-run equilibrium relationship, in the short term, exchange rate changes on three industry influence is effective, and the exchange rate is the Grainger reason for the three industrial structure adjustment of central region. In conclusion, put forward central region industry structure adjustment policy recommendations, including: focus on the development of new industries, expansion the coverage of high and new technology industry garden, strengthen international cooperation of multinational enterprises and so on.