The Analysis On The Employment In China Against The Influence Of Exchange Rate Fluctuation

Full employment is one of the most important goals of macroeconomics policy in China. It affects the social stability. The growth of employment means the growth of the total economics outcomes. It also means the optimization of the structure of the economics. Since the reform of RMB exchange rate formation mechanism in2005, the RMB exchange rate against U.S. dollar has been continuing to appreciate. Chinese labor-intensive export industries, with its competitive advantage of cheap labor costs, as well as low product prices, have been suffering a severe impact due to their export of low-added value products. In this paper, the combination of theoretical and practical analysis of research methods is used to explore the influence that exchange rate reform exerts on employment.In this paper, the combination of theoretical and practical analysis of research methods is used to explore the influence that exchange rate reform exerts on employment. By using the related references, this article researches the channels effecting the employment. On the meanwhile, it also researches the effect on the employment, which is caused by the changes on the RMB exchange rate. From the empirical analysis, this article adopts the annual data of total employment, real exchange rate and actual GDP from1994to2011, verifying the stability of time series data by unit root test, and introduces0-1variables in addition and multiplication form, which reflect the reform of exchange rate mechanism leading to the change of economic structure.In selecting data, this article choice the real exchange rate and real GDP as independent variables. This is deferent form those references which use the nominal exchange rate as their dependent variable. I believe that the connection of the actual variables and the economics will be closer by excluding the price factor. In building the theoretical model, this paper is deferent form those which build models microscopically. By using the Keynesian multiplier theory on the open economic conditions and the relations of the net exports and the employment, I build the elasticity between the employment and the exchange rate macroscopically. By considering the structural changes in the real exchange rate data, this paper introduces a dummy variable. Generally speaking, this paper is considering not only the long-term congregational relationship between variables, but also the dynamic relationship between the variables.This paper firstly introduces the reform process of the RMB exchange rate regime. Then this paper analysis the specific content of the exchange rate system reform in2005. It makes the mechanism more market-oriented and more flexible.The article analyzes the impact on the employment which is caused by the appreciation of RMB in the short-term, medium-term and long-term. In the short-term, the appreciation of the RMB exchange rate effect export enterprises by affecting the foreign trade. The appreciation of the RMB exchange rate make the production costs for domestic enterprises increase, mainly due to the relative rise in labor costs, domestic purchase prices of raw materials. At the same time, the price of export products is relatively higher. According to the law of demand, the demand for export products will be reduced as in the case of other factors constant, which will result in the export enterprises to reduce the scale of production. Then the amount of employment will decrease.In the medium term, the impact on the employment by the appreciation of the RMB is uncertain. This is mainly because foreign investors will, on the one hand, use advanced technology to replace labor. On the other hand, this will expand the scale of production increasing capital investment elements. This will also increase labor input. So we can see that when the RMB exchange rate is appreciating, the increase or decrease in the amount of foreign direct investment, the impact of changes in foreign direct investment on domestic employment is not certain, but depends on a number of practical factors.In the long term, the appreciation of the RMB will accelerate the industrial restructure. The appreciation of the RMB will also improve the distribution of national income and expand the domestic demand, thereby increasing our employment. But the "hot money" will enter into China in the interests of the appreciation of the exchange rate. This will increase the prices of stocks and houses, increasing asset bubbles. This will do harm to the development of the economy. Thus, the appreciation of the RMB exchange rate in the long run is conducive to the adjustment and upgrading of industrial structure. However, the monetary authorities should also focus on the control of the appreciation of the RMB, which is expected to prevent speculative hot money.this article adopts the annual data of total employment, real exchange rate and actual GDP from1994to2011, verifying the stability of time series data by unit root test, and introduces0-1variables in addition and multiplication form,which reflect the reform of exchange rate mechanism leading to the change of economic structure. From the regression results, the appreciation of the RMB has an impact on the employment in the short term. But in the long term, it can’t effect the employment. Although it cannot prove that the appreciation of the RMB can increase the employment, it can promote economic restructuring.Then the paper compares the impact of exchange rate fluctuations on the employment in Japan and China to find a way to solve the problem. It firstly introduces the reform process of the exchange rate regime in Japan. Then it analyzes the deferent impact on the employment between Japan and China in the consumption, investment and foreign trade.Although the appreciation indeed reduces the scale of employment, in the long term economy will adjusts industrial structure and employment structure, which contribute to the economy’s long-term, sustainable development, by the market power. What we can’t ignore is a negative impact on employment in short term, concerning the social stability, so the article put forward some recommendations form government, business and personal point of view.