The impact of RMB appreciation on export-based enterprises in China

Abstract

As globalization and integration of international financial market has proceeded the role of exchange rates has gained in importance to both the academic literature and policy makers-both firms and government. This paper calculated the real effective exchange rate in the period 1985-2012 based on the proportion of Chinese trade partner’s bilateral trade in China’s total trade. 16 countries were selected on the basis of a large bilateral trade volume with China. The empirical analysis revealed mixed results. A relatively weak relationship was found between the RMB real effective rate and China’s total exports and no long-term relationship. However, for export oriented firms, RMB appreciation was found to have some adverse results.