The Impact Of Exchange Rate Fluctuations On China’s Manufacturing Industry And The Countermeasures

Since30years’ reform and opening up, China’s manufacturing industry has made remarkableachievements. Exports scales have expanded rapidly, the current account surplus is increasing. Atthe same time, in recent years, forced by the pressure of Western developed countries, the People’sBank of China carried out a more flexible exchange rate regime in2005, which made RMB begin toenter the fast channel of appreciation. Up to April2012, the RMB against the U.S. dollar hasappreciated about30%. However, the vast majority of China’s manufacturing export products is stillshallow, the degree of processing high-energy-consuming and labor-intensive products with lowadded value, such as textiles, clothing and crude steel. In the international environment ofcontinuous appreciation of RMB, the production of these primary products constantly enhance thesensitivity to changes in exchange rates, the exchange rate has become an important factor in thesurvival of China’s export enterprises.Therefore, against the enormous impact of the RMB appreciation on China’s manufacturingindustry in recent years, this paper first selects three typical RMB exchange rate transmission path,which are foreign trade transmission path, the production cost transmission path and the interest ratetransmission path; then, from the theoretical level, analyze the impact of the RMB exchange ratethrough the three typical path on China’s manufacturing industry. Theoretical analysis shows that:the RMB appreciation weakened the international competitiveness of China’s manufacturing exports, resulting in reduced manufacturing exports, which showed negative effect, and the RMBappreciation reduced manufacturing production and capital costs, which expressed as a positiveeffect, but on the whole, negative effects are larger than positive effects so that the RMBappreciation to the overall impact of China’s manufacturing industry showed negative effects.Empirical Analysis transmission effect of the RMB exchange rate, to verify the theoretical analysisconclusion, empirical studies show that: RMB appreciation path through the foreign trade ofChina’s manufacturing industry to form a negative impact, consistent with the conclusions of thetheoretical analysis, raw material prices and interest rates are not sensitive to the fluctuations of theRMB exchange rate, the RMB appreciation will not change the price of raw materials and interestrates, therefore, the empirical analysis also shows that the negative impact of RMB appreciation onChina’s manufacturing industry; Finally, on the basis of learning from international experience,according to the current development of China’s manufacturing industry, to avoid exchange rate riskstrategy and policy recommendations.