The Empirical Study Of RMB Exchange Rate And China’s Manufacturing Export

In2005, China began to implement a more flexible exchange rate based on market supply and demand with reference to a basket of currencies, a managed floating exchange rate regime, and the RMB exchange rate not only pegged to the US dollar any longer, but formed a more flexible exchange rate mechanism. And RMB appreciated2%immediately. After2005’s reform, RMB continued to appreciate, and by the end of2011, RMB has appreciated more than28%with a further rising trend. According to the traditional trade theory, the continuous appreciation of RMB has some negative influence on China’s export. Since the reform and opening up, we saw a dramatically growth in foreign trade of China. From1980to1990, the annual growth rate of exports in manufactured goods is19.10%. However, the rate dropped to12.46%after the currency system is reformed. At the same time, the price of labor in manufacturing industry is rising, thus, our advantage in the low labor cost which the economic development relies on is disappearing. However, the growth rate of the labor’s price is lower than the growth rate of economic, we can predict that the price of the labor will rise rapidly afterwards. Our export goods’added value is low because of lacking our own core technology. Our export is severely affected by the world’s demand because of the high dependence on trade, and the export decline significantly in the financial crisis in2008. As a result, it causes great pressure for the exports of manufacturing industry, but it’s also an important opportunity for the transformation of manufacturing industry.Based on these situations, this paper studies whether we can realize the industry restructuring forced by the the reform of the RMB exchange rate. This paper has three objectives:First, how the RMB exchange rate changes affect the export of China’s manufacturing industry as a whole in place; second, whether the difference of the RMB exchange’s influence among30industries is differecnt; third, whether the technology elements is the reason of the difference. The main content of the paper is as follows:Firstly, I review the classical theory in international trade, including the classical theory, the concept of elastic analysis, incomplete exchange rate pass theory and related open theoretical macroeconomics. Then I expound the current situation of the manufacturing export, and review the change in the number, structure, quality and trends of China’s manufacturing export since1980and analyses the current geographical distribution, market structure, trade patterns and other relevant characteristics of China’s manufacturing exports. Secondly, this paper analyses the influence which the change of the RMB exchange rate has on the manufacturing industry in China by the model of VAR, the ADF test, the cointegration test, the granger casualty test, the pulse analysis and the variance decomposition; and analyses the different influence which the change of the RMB exchange rate has on the30kinds of subdivided manufacturing industry. Also this paper studies the relationship between the technology intensity and this influence.At last this paper puts forward three conclusions:firstly, the change of the RMB exchange rate has remarkable influence on the whole export of the Chinese manufacturing-the RMB appreciation has led to the decrease of the manufacturing exports and at the same time the increase of the manufacturing imports would add to the pressure of the RMB appreciation; secondly, the change of the RMB exchange rate has a comparatively different influence on the30kinds of subdivided manufacturing industry which is more negative on the export of the traditional manufacturing and less negative on the new manufacturing; thirdly, the technological level of the industry is a crucial factor that has influenced the exchange rate elasticity of the exports of all the Chinese industry. The higher the technology level of the industry is, the less it will be influenced by the change of the RMB exchange rate negatively; the lower the technology level of the industry is, and the greater it will be influenced by the change of the RMB exchange rate negatively. Therefore, we shall complete the forming mechanism of the RMB exchange rate and make the RMB exchange rate do service for the economy of our country, transform the form of the development and promote the traditional industry. The government shall also develop the new type of manufacturing and increase the creative capability of the new manufacturing. Only when the speed of the industrial technology catches up with that of the labor cost, our country can keep constant international competitive strength.