The Effect Of RMB Exchange Rate Changes On China’s Manufacturing Export Competitiveness

For a long time, China’s export-oriented manufacturing development strategy brings better utilization of production resources in our country, as well as accumulation of a large amount of foreign exchange reserves. Through foreign direct investment and processing trade mode, a large amount of capital goods and advanced technology flows into our country. Overall, the export plays an irreplaceable role in the economic development of China. Traditional trade theory suggests that a country’s currency appreciation often leads to the deterioration of trade balance, in our country, however, appreciation of the RMB has been accompanied by trade surplus continuing to expand since 2005, which comes from both external demand rises and export competitiveness enhancement. The impact of exchange rate changes on the export competitiveness is established on the basis of exchange rate pass-through theory. The academic study about exchange rate pass-through at home and abroad has been relatively mature, but research about the impact of RMB exchange rate changes on the export competitiveness is relatively small. Some related studies are from the macro level, which make the qualitative analysis and statistical analysis by using the integration of a single data. Changes in a country’s export competitiveness is often the process of industry development in microscopic level to trade performance in macroscopic level. And in the face of China’s economic transformation and structural adjustment in production, it is necessary to study the effect of exchange rate changes on different industries to reveal the competitive industries in manufacturing department, for the purpose of formulating the corresponding policy in the adjustment of industrial structure and trade strategy development.The development of manufacturing industry is the source of a country’s capital accumulation, and also has irreplaceable function in economic growth and employment stability. Usually, it accounts for the largest part of a country’s export. The subdivision industry within the manufacturing differs in resource intensity, technical level, production efficiency. In the face of a series of domestic and foreign macroeconomic background:continued appreciation of RMB, export growth slowing, the stagnant recovery of international economy, the re-manufacturing of western countries, the research of effects of RMB exchange rate changes on China’s manufacturing export competitiveness has significant practical importance.This thesis in detail reviews the theories and of literatures of export competitiveness and the exchange rate pass-through. On the basis of such theories, the thesis analyzes mechanism of exchange rate transmission and measures of export competitiveness indicators. After comprehensive comparison of the advantages and disadvantages of export competitiveness indicators, reasonable index is selected for the description and analysis of export competitiveness for various industries in China’s manufacturing. Next, empirical model is built for the RMB econometric analysis of the effects of exchange rate changes on the export competitiveness, and explains the results of the empirical test. Research results show that the RMB exchange rate changes in the long run has positive impact on China’s manufacturing export competitiveness, including the overall manufacturing and industry segment. But, the promotion is mainly from manufacturers’ lower export prices of export under the pressure RMB exchange rate appreciation. The influence of RMB exchange rate change varies in changing the import and export price for different industries, which finally result in the different responses of export competitiveness. This difference is rooted in the productivity, technical content, degree of substitution competitiveness of the export products, which thus affect the export manufacturers’ pricing power. Therefore, in order to ensure the steady growth of export competitiveness, and expand the manufacturer’s profit ability, we need to adjust and optimize the trade structure, enhance the export competitiveness of high-tech products, which also matches with the domestic industrial structure transformation in our country.