Real exchange rate and employment in the manufacturing sector in China

In this paper, the impact of real exchange rate on employment is theoretically investigated. Three channels are identified. 1. Capital/labor intensity channel: the real appreciation, which decreases the cost of imported inputs and increases real wages expressed in tradable goods, exerts a negative effect on employment by increasing capital/labor intensity. 2. Openness channel: a real appreciation does not favor exports and attract foreign direct investments, thereby a negative effect on employment. 3. Efficiency effect: a real appreciation exerts a pressure on efficiency improvement, thus a negative effect on employment. Using the panel data of the 29 Chinese provinces for the period from 1994 to 2002, the econometric results confirm the negative effects of the real appreciation of Renminbi on the manufacturing employment. The three channels are statistically significant, in which capital/labor intensity channel is more important.real exchange rate, employment, China

Real Exchange Rates and China’s Bilateral Exports towards Industrialized Countries

A bilateral export demand function is developed to study the effects on the Chinese bilateral exports of three real exchange rates, corresponding respectively to the price-competitiveness of Chinese products on the market of the considered import country (traditional effect), on China’s other export markets (pricing-to-market effect), and to the price-competitiveness of Chinese competitors on the market of the considered import country (third-export-country effect). This function is then applied for Chinese real bilateral exports towards eleven industrialized countries over the period from 1991 to 2004. The econometric results confirm the effects of the three real exchange rates on the Chinese bilateral exports.bilateral exports, China, real exchange rates

Does Comparative Advantage Explain Export Patterns in China?

Revealed comparative advantage indices are calculated for China (1980-2000 period) and the Chinese provinces (1990-1998 period) and then incorporated into a reduced form export equation. The results of China’s export patterns show that China has moved from a heavy industry-oriented development strategy to a comparative advantage one, with, however, marked differences among provinces. The econometric results show that this shift had a significant impact on the exports, besides the effects of real effective exchange rate, world demand, and domestic supply.China, Export patterns, Exchange rate, Comparative advantage

The Effect of the Real Exchange Rate on Technological Progress. An Application to the Textile Industry in China

Technological progress in the textile and clothing sectors is measured for 26 Chinese provinces using panel data by sector and the stochastic frontier method. The impact of the real exchange rate on this technological progress, as well as its transmission channels, are respectively estimated. The technological progress is positive for both sectors, and the real depreciation of the Chinese currency contributes to this improvement. Due to the dominant non state-owned enterprises in the clothing sector, both technological progress and the effect of real depreciation on the increase of technological progress are twice as high as in the textile sector. The principal transmission channel of the impact of the exchange rate on technological progress is through imported equipment, but not through openness.China., stochastic frontier method, technological progress, real exchange rate

Economic openness and public expenditure in China: a regional analysis

The transition of China towards a market economy was accompanied by a vast fiscal decentralisation movement. Econometric analysis of the determinants of budgetary and extra-budgetary expenditure of the provinces does not permit us to reject the hypothesis that the provinces observe a similar behaviour to governments of developing economies which are significantly affected by external shocks and that, in order to alleviate external risk, the provinces take control of a more significant share of the revenues of the economy

Real exchange rate and productivity in China

This article investigates the impact that the real exchange rate appreciation in China has exerted on productivity growth since 1994. We remind the arguments explaining a positive or a negative impact of a real appreciation on efficiency and on technical progress. DEA Malmquist indices of productivity growth and of its two components are calculated for twenty-nine Chinese provinces. The econometric estimation shows that the appreciation of the real exchange rate had an unfavourable effect on technical progress but a favourable effect on efficiency growth, and these two effects offset each other partially to give a lesser negative effect on productivity growth.real exchange rate., productivity, DEA Malmquist index, China

The Balassa-Samuelson effect and inflation in the Chinese provinces

The Balassa-Samuelson effect is employed to explain the observed differences in inflation between the Chinese provinces. A three-good model is proposed to better take account of the specific features of China. This model which includes, besides Balassa-Samuelson effect, demand side factors, is tested for 29 Chinese provinces using cross-sectional and panel data for the 1992-1999 period. The econometric results show that the hypothesis that the Balassa-Samuelson effect explains the durable differences in inflation between provinces is not refuted. This suggests that the Chinese economy broadly works as a market economy.real effective exchange rate and China., inflation, Balassa-Samuelson effect

How Does Real Exchange Rate Influence Income Inequality Between Urban And Rural Areas In China?

The channels through which the real exchange rate influences urban/rural per capita real income inequality are analyzed using yearly data for 28 Chinese provinces. Due to the higher share of tradable goods produced in urban than rural areas, the real depreciation of the Chinese currency raised the urban bias, contrary to the effect usually expected. This rise was, however, mitigated because of the impact of the exchange rate on the urban/rural consumer price ratio, real public wages, and the ratio of industrial/agricultural protection rates. It disappeared for coastal provinces due to the strong development of outward-oriented rural industrial activities.China, income inequality, real exchange rate

Appreciation of the renminbi and urban-rural income disparity

Although poverty has been significantly decreased in China over the last twenty years, this decrease has been highly unequal across the provinces and has brought increased disparity in urban and rural per capita income. We studied the impact of exchange rate policy on urban-rural per capita income, which was marked by strong real depreciation before 1994 followed by moderate appreciation before stabilizing. We concluded that in the inland provinces where poverty is hardest, real appreciation has attenuated disparity whereas real depreciation had accentuated disparity. This result argues for a revaluation of the renminbi.income inequality;real exchange rate;China;Urban-rural inequality