The Empirical Study On The Influence Of RMB Real Effective Exchange Rate On Upgrading Of Manufacturing Structure

As a traditional manufacturing country, the manufacturing sector has long occupied an important position in our national economy, promoting our economy greatly. Therefore, the evolution of the structure of the development of manufacturing will be having an influence on the overall economy of our country as well as domestic employment issues. Since the reform and opening up, our economic is developing rapidly. However, because of our economy is export-oriented, our government has been promoting economic growth by undervaluing RMB, so RMB is undervalued for a long time. Therefore, the long term trend of the appreciation of RMB is inevitable. Since2005exchange rate reform, the RMB is appreciating greatly, from6.1932in2005to8.1917in2013, appreciating about32%, and our economy is expanding slower due to the appreciation. Therefore, in the background of the appreciation of the RMB, it is meaningful to conduct research in the relationship between real effective exchange rate and the structure of manufacturing industry.In this paper, we use annual data from1993to2012to conduct research in the relationship between real effective exchange rate of RMB and the structure of manufacturing industry. During the paper, we use the method of least squares regression and residual alternative to analyze that how the exchange rate movements influence structure of manufacturing industry by the two ways of FDI and international trade. The research result shows that the RMB appreciation can promote foreign direct investment inflows, then promoting the upgrading of the manufacturing sector; while the RMB appreciation would decrease exports but increase imports, and then having a negative impact on the upgrading of the manufacturing sector. But the positive effect is greater than the negative effect of the appreciation of the RMB, so the appreciation of the RMB will promote the upgrading of China’s manufacturing industry. Finally, the paper comes to its main conclusions and gives some policy recommendations on upgrading the structure of our manufacturing industry.