The Effect Of RERR On The Performance Of Manufacturing Firm

Exchange rate is the relative price of currency exchange and one of the important factors that affect the competitiveness of a country’s products in the international market.Manufacturing is a national foothold and important factor to promote economic growth and enhance the national comprehensive national strength and core competitiveness.China has become the world’s largest exporter and the second largest importer for several years.The gross output value of Manufacturing industry have reached 3.62 trillion US dollars in 2015,of which exports 2.17 trillion US dollars,accounting for 59.9%.With the deepening of the RMB exchange rate mechanism reform and the increase of exchange rate,the exchange rate has become an important factor affecting the competitiveness of our products.Therefore,it is of great significance to analyze the change of exchange rate to the performance of China’s manufacturing enterprises.This paper uses the Chinese industrial enterprises database and the customs trade database from 2000 to 2006 to study the impact of the real effective exchange rate changes on the performance of the manufacturing enterprises though the three channels of export benefit,import costs and import competition.The results reveal in this paper that the appreciation of the RMB,increasing the price of domestic products in foreign currency,have negative impact on firm performance through export benefit channel.The appreciation of the RMB can reduce the cost of imported goods in their own currency prices and have a positive impact on corporate performance through the cost of imports.The appreciation of the exchange rate will reduce the price of imported products and make domestic enterprises face more competitive pressure,have a negative impact on the performance of the enterprise for the import competition channel.At the same time,Our empirical analysis shows that the effects of real effective exchange rate on the performance of the enterprise varies across different firm and industry characteristics.The impact depends upon productivity,industry concentration,capital intensity and company ownership.