An Empirical Study On The Exchange Rate Movements’Impact On China’s Export Of Multi-product Firms

In recent years, the heterogeneous firm trade theory which is now popular in the international research field explains the actions of the heterogeneous firms reasonably from the microcosmic point of view. Along with the gradual improvement of the availability of micro enterprise trade data, more and more international studies found a striking feature that international trade business have always been concentrated in a few enterprises. Compared with the export trade data between multi-product firms and single-product firms from2000to2006, we can find that the multi-product firms play a leading role in the export trade in our country. In order to further study the contribution of extensive margin of multi-product firms to Chinese export trade, according to decomposition method of Bernard et al.(2009), we can study the dual margins of Chinese trade growth from both the time dynamic change and the cross-section static change. The results show that the extensive margin’s contribution to export growth is slightly higher than the intensive margin following the perspective of time dynamic change after considering the product-dimension and market-dimension, while the intensive margin explains most of the export growth following the perspective of cross-section static change. China should support multi-product export firms to increase extensive margins by increasing the number of export firms and realize a diversified export growth.Exchange rate is one of the important indexes which can affect the import and export trade in a country or a region. Since July21,2005, after the reform of the RMB exchange rate system in our country, the RMB exchange rate is appreciating steadily. Besides, there are still many export problems along with the export trade sustained growth in China. To China, it is of a great significance to study the relationship between the RMB exchange rate movements and Chinese export trade. According to the model of heterogeneous firm trade theory, using2000-2006data of Chinese Customs Database and Industrial Enterprise Database, this paper empirically studies the effect of RMB exchange rate movements on the export behavior of China’s multi-product firms. It is founded that the RMB exchange rate appreciation makes multi-product firms tend to reduce both export price and export quantity, the price and quantity fluctuation amplitude in productive firms are higher than those in lower productivity firms. Considering the product ladder within multi-product firms, RMB appreciation significantly reduces both the export prices and export quantities, which is more obvious for the core products than the non-core products. Finally, the exchange rate appreciation makes multi-product firms tend to stop exporting its marginal products, thereby reducing the export product scope. This paper provides us a new perspective about the export behavior from the micro multi-product firms.