The Analysis Of How The Exchange Rate Change Impacts The China Industrial Structure

While China’s GDP has surpassed Japan to become the second largest economy in the world, but there are still many problems with the rationality of the industrial structure in China. The industrial structure is to be further optimized. There are many factors affecting the industrial structure, this paper focus on the impact of changes in the exchange rate and its volatility on China’s industrial restructuring.On the basis of literature review, this paper’s theoretical analysis is from three paths: the price pass-through effect, the effect on foreign trade and the effect on foreign direct investment. This paper uses the unit root test, Johansen cointegration test, and Granger causality test to study the impact of changes in the level and volatility of the exchange rate on the three industrial structures as well as the manufacturing sector structure. The empirical results show that changes in the level and volatility of the exchange rate has indeed played a certain role in the adjustment of the industrial structure in China. At the end of this article, it gives a few suggestions according to the analysis of the results of the article.