The Effect Of RMB Exchange Rate Movement On Sales Revenue Of Manufacturing Industry

Since July21,2005,China has reformed the RMB Exchange Rate Regime, weadopted a managed floating exchange rate system instead of pegging to the dollar.Thereform of exchange rate system in China caused widespread concern, in particular, itsnegative impact on China’s economy. Since the reform and opening-up, China’smanufacturing industry has been developing rapidly, it’s total scale has been among theformer position and it’s comparative advantage in the international is very obvious. Atpresent,manufacturing exports accounted for the vast majority of China’s export,andmany enterprises put the sustainable sales revenue as the primary task,Therefore it isnecessary to research exchange rate reform’s impact on the sales revenue of themanufacturing industry.This paper researches the impact of exchange rate on manufacturing industry bypanel structural VAR model with interaction effect (IEPSVAR),so in this paper, firstly weintroduced the IEPSVAR model and its estimated. Secondly,we have carried on analysisto influencing factors of income. Based on the conduction path that exchange ratevolatility affect the export prices, export revenues and thus affect the sales,put thevolatility of China’s Renminbi (RMB) exchange rates as a common factor,usingIEPSVAR model to estimate the contribution of RMB exchange rates volatility on thesales revenue of the28industries in the manufacturing industry. The results show thatRMB exchange rate volatility has greater impact on light industry and high technologyindustry.The appreciation of the RMB exchange rate is benefit to the industries that havebigger import dependence and samller export dependence, the traditional type of exportadvantage (labor-intensive and R&D investment less) industry will be damaged.Face to the pressure of appreciation of RMB, the policy makers should makerevelant policies to alleviate the negative effects of RMB appreciation,such as raising labor productivity in the manufacturing sector, raising the level of production technologyect. At last China ought to make efforts to upgrade China’s industrial competitiveness inthe international arena.