Research On The Impact Of Third Country’s Exchange Rate On China’s Export Of Major Industries’ Products To The United States

With the continuous promotion of RMB exchange rate reformation and maturity of international trade,the relationship between exchange rate and export trade is becoming more and more complex.In recent years,trade frictions between China and the United States have been frequent.The United States repeatedly tried to exert appreciation pressure on the RMB to improve its huge trade deficit,and imposed sanctions on China’s multi-industry exports to the United States.Under this background,the United States’ import,which has been from China,may transfer to other economies,and the exchange rate changes of another country may also affect China various industries’ export trade with the United States to a certain degree.Therefore,based on the traditional exchange rate-export trade research,this paper introduces “third-country” factors to explore the impact of the third country’s exchange rates’ changes on China’s export trade with the United States at the industry level.In China’s export trade with the United States,which country may have strong trade competition with China in various industries? Will the exchange rate’s changes of these countries affect China’s export volume and how will the specific influence be like? These are the key problems to be solved in this paper.Through the Trade Partner Substitutability Index(TPS),this paper calculates the coincidence of goods exported to the United States between different countries and China,compares their export scales and selects the country with strongest substitution against China in various industries as the third country.After that,this paper selects monthly data from September 2005 to February 2018,and chooses the volume of China’s industrial export to the United States,U.S.GDP,RMB and the third countries’ exchange rate and exchange rate volatility as variables to establish vector autoregressive models(VAR)for 20 export industries,in order to empirically test the impact of the thirdcountry’s exchange rate changes on Sino-US export trade and find the evidence of“third-country” effect.This article draws following conclusions.Firstly,China’s export trade with the United States is less affected by the changes of RMB and the third countries’ exchange rate,but it is greatly affected by exchange rate volatility.This means that RMB appreciation can’t significantly improve America’s trade deficit.Secondly,half of the industries show “third-country” effect in China’s export toward the United States.Thirdly,in the industries which are significantly affected by the third countries’ exchange rate,the depreciation of the exchange rate of the third country reduces China’s exports to the United States.In the industries affected by the exchange rate fluctuation of the third country,the increase of fluctuation shows a positive impact on China’s exports,indicating that the exports of the third country to China are competitive and alternative.Fourth,Canada plays substitutional role in China’s export industries showing the third country effect,including Canada.What’s more,different industries’ responses toward variables are different.This shows that when formulating trade policy about China’s export toward the United States,China should pay attention to the industrial characteristics and fully consider the impact of the exchange rate of the third country in export,so as to promote the sustainable and coordinated development of China’s export trade to the United States.