Analysis Of The RMB Exchange Rate Fluctuations On China's Textile Exports

RMB exchange rate fluctuation is always a focus of attention at home and abroad.Since China implemented the exchange rate reform in July2005, RMB exchange ratefluctuation has relatively great. It’s no doubt that RMB exchange rate fluctuation has a greateffect on China’s economy. And this triggered many researches about how RMB exchangerate fluctuation affects China’s economy mainly focusing on the effects on the wholeeconomy. For example, the RMB exchange rate fluctuations have effects on China’s economicstructure, import and export trade, and employment levels. However, the studies on the effectsof RMB exchange rate fluctuation on specific industry are deficient. China is the world’s largetextile producer and exporter and textile industry has always been the traditional pillarindustry in China. Evidently, the large exports of textile industry have a big influence onChina’s economy, especially on the advantages it created in foreign exchange income byexport. So under the background of RMB exchange rate fluctuation, has our country’s textileexports changed? Is the effect of RMB exchange rate fluctuation to China’s textile exportconsistent with the theory of international economics? At the same time, what should China’stextile export enterprises do to cope with the effects? The solutions to these issues will deepenthe research and understanding about the effect of RMB exchange rate fluctuation to China’stextile export. Therefore, the paper tries to solve those problems by analyzing the relationshipbetween RMB exchange rate fluctuation and the textile export.The paper firstly analyzes the present situation and the trend of the RMB exchange ratefluctuations and discusses that RMB appreciation is the inevitable trend through the RMBexchange rate fluctuation theory and the tendency of RMB exchange rate. Then the paperanalyzes the present situation of China’s textile export through export scale, internationalenvironment and whether there are trade barriers. Secondly, the paper analyzes the influenceof the RMB appreciation in theory based on the elastic theory of Marshall-Lerner condition,J-curve effects and the characteristics of China’s textile export industry. Due to the lag, theinfluence will lead to an increase in trade surplus and the textile exports in the short term, butthen the influence to textile exports will gradually decline. Thirdly, the paper conductsempirical research. Textile exports, RMB real effective exchange rates, PPI and export rebaterate are chosen as explanatory variables. The paper tests the influence of RMB exchange ratefluctuation on China’s textile exports by establishing the VAR model, granger causality test,impulse response analysis and analysis of variance. And the conclusion is consistent with thetheoretical analysis that is the RMB appreciation will make the textile export grow rapidly and then grow steadily. Finally, the paper gives relevant suggestions from the four aspects ofthe micro, the macro, government and industrial associations in order to improve thecompetitiveness of China’s textile enterprises.