| Since the reform and opening up, foreign trade has played a powerful role inboosting China’s rapid economic development. Mechanical and electrical products isChina’s largest export product and always occupy an important position in China’sforeign trade pattern. However, RMB makes continuous appreciation after the reformof the exchange rate regime in July2005, this trend has increasingly prominent impacton foreign trade. So analysis of exchange rate fluctuations on the export ofelectromechanical products is extremely necessary.This paper use the theory of elasticity and exchange rate pass incomplete theoryto analyze how the change of exchange rate affects the structure of export ofelectromechanical products. In the empirical section, I use the monthly data from May2008to December2012to verify the theoretical analysis and get a number ofconclusions.This article theoretical analysis supports that RMB appreciation have an adverseeffect on the export of electromechanical products and the different products affectedto different degrees. Especially, the empirical results have proved this point. RMBappreciation has the most intensive effect on the Capital and technology-intensiveproducts such as Machinery and equipments and electrical products. On the contrary,RMB appreciation has the minimal impact on the Labor-intensive products such asinstruments and meters industry.This paper considers that the theoretical analysis and empirical results based onthe real economic situation of China.The last of this paper have made some point ofpolicy recommendations for China’s exchange rate system and China’s industrialpolicy.Exchange rate policy Suggestions:1. Continue to promote the reform ofexchange rate system;2. To establish a reliable foreign exchange market. Industrialpolicy Suggestions:1. To improve the added value of products.2. A clear focus on developing industries;3. Both industry development and employment should be payattention to. |
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