Rmb Real Exchange Rate And China's International Competitiveness

International competitiveness of a country is identified as the core determinant of its economic performance, and real exchange rate(RER) is the important variable affecting international competitiveness of a country. Therefore, it is very important to China to put forward the management strategy for China's international competitiveness based on the study of the relationship between RMB's RER and China's international competitiveness.Before the research on the relationship between RMB's RER and China's international competitiveness, we analyze the changes of RMB's RER and the impact resources of its changes during 1980—2004. Based on the analysis, we find: First of all, the tendency of RMB's real effective exchange rate(REER) can basically bedivided into two stages during the investigating period—the wide devaluation stageduring 1980—1994 and slight appreciation stage during 1994—2004. Secondly, the devaluation of RMB's exchange rate relative to U.S. dollar was the main factor of the devaluation of RMB's REER during 1980—1994; in the period 1994—2004, the rising range of China's price index is higher than Chinese trading partners', and it was the main factor of the appreciation of RMB's REER. At the same time, the change of RMB's bilateral RER relative to Japan yen was the main factor of the change of RMB's REER in the whole period. And then we analyze the changes and internal structure of China's international competitiveness, through the analysis, we find: in the period 1980—2004, China's international competitiveness was being strengthened constantly, with very great rising range and fast growth rate. At the same time, the international competitiveness of Chinese primary product is dropping constantly during the investigating period, but industrial products's international competitiveness is rising gradually. After analyzing the relevant contents of RMB's RER and China's international competitiveness, we carry on the empirical research on the relationship between them. Our study shows : First of all, RMB's RER is unsuitable to be regarded as the index of weighing China's international competitiveness, but it can be regardedas the index of weighing price or cost competitiveness of Chinese products in the international market; in the period 1980—1994, the price or cost competitiveness of Chinese products in the international market was strengthened largely, but it was weakened gradually during 1994—2004. Secondly, the appreciation of RMB's RER will drop China's international competitiveness on condition that other variables keep constantly. Finally, RER misalignment of RMB will do harm to China's international competitiveness.Through the above analysis, we put forward the management strategy for China's international competitiveness based on RMB's RER: First of all, RMB's RER will face medium and long-term appreciation in the precondition of pursuing long-term fast economic growth in China. However, the appreciation of RMB's RER is unfavorable to the improvement of China's international competitiveness. So, under the background of the fact that RMB's RER will face appreciation in midium or long term, we should strengthen China's scientific and technological competitiveness and effective supply ability to keep and promote the international competitiveness of China. Secondly, because equilibrium real exchange rate corresponds to the optimum economic state of a country, RER misalignment will drop the international competitiveness of a country. So, if RMB's RER deviates from its equilibrium value, we should regulate RMB's RER to make it return to the equilibrium level.