Study On The Impact Of Exchange Rate To Export Prices Of China

After the collapse of Bretton Woods System in 1973, many developed countries put floating exchange rate system into practice. Exchange rate fluctuated so frequently that the impact of exchange rate to price became the focus in both theory department and practice department. After the implement of China's market-based single managed floating exchange rate reform in 1994, a lot of domestic scholars started studying on the impact of exchange rate to price, and the focus was the impact of exchange rate to import prices and to domestic prices because RMB exchange rate's fluctuation is not so obvious to influence the export. Since the improvement of exchange rate reform in 2005, especially the implement of exchange rate market maker system in 2006, RMB exchange rate have fluctuated very frequently and appreciated steadily, so the studies on impact of exchange rate to export prices have been increased gradually. In recent years, the impact of RMB exchange rate's fluctuation and appreciation to China's enterprises'price regulation has become more important. Especially in 2009 global economic downturn, China became the second largest trading country in the world with huge outlet pressure due to the appreciation of RMB, decrease of market demand and irrational export commodity structure etc. Beginning with the impact of exchange rate to export prices and analyzing China's enterprises' pricing capacity have very important research value.In this paper, based on the incomplete competition theory, pricing to market theory and calculation of China's monthly export commodity price index, using export commodity price and exchange rate as main sample and exports'marginal cost, market demand and competitors'price, establish the model under the assumption of incomplete competitive market, enterprise's maximum profit principle and goods'infinite supply elasticity to explain the impact of RMB real effective exchange rate to China's monthly export commodity prices, and find China's exchange rate impact equation through factor validity test, and methods for government and export enterprises to heighten the pricing capacity and improve the export commodity structure.The three parts of this paper's main content are as follow:The first part is theoretical analysis on the impact of exchange rate to export prices. Beginning with the definition of exchange rate pass-through which describes the impact of exchange rate to price, based on a simple relationship between exchange rate and export prices given by law of one price and theory of purchasing power parity, sort out the theoretical evolution of the impact of exchange rate to export prices and the influent factors. Among that, incomplete competitive market and pricing to market can explain the impact so well that can be used as theoretical foundation for this study.The second part is sample index's calculation. Because China's monthly export commodity price index has been announced by Customs since Jan.2005, for research need and index consistency, using amount and number data of 254-279 commodity categories (different from year to year) in "Customs Statistics" Main Export Commodity Table and same calculation method that Customs uses-unit value index method, according to data validity commodity selecting principles-excluding the number and/or amount missing category, category whose number is less than 10 units and repetitive category, self-calculate the price index since Jan.2000 to provide the continuous sample for empirical analysis.The third part is empirical analysis and conclusion. After ADF test of China's monthly export commodity price index, RMB real effective exchange rate, producer price indices of industrial products, industrial production and export unit values from Jan.2000 to Jun.2010, analyze stationary time series by multiple regression analysis which can prevent multicolinearity, combined with regression equation validity test-heteroscedasticity and autocorrelation test to delete demand and cost factors whose impact is not obviously, and find appropriate exchange rate impact equation for China. The analysis shows that RMB exchange rate and competitors'price are most important when formulate the export commodity price, and the coefficients are 86.6% and 47.9%, which means China's export enterprises price commodity by referring to competitors' price and taking exchange rate movements fully into account.In a word, the majority of China's exports are food, raw materials and simple products, and high-tech products only take a very small proportion, which means the advantage of export commodity in the international market is price, resulting in export enterprises'low pricing capacity because they can't absorb the impact of price changes caused by RMB appreciation for market share. Therefore, government and export enterprises should pay a great attention to intellectual property protection and development of characteristic products to open up the international market during the industrial upgrading process. In addition, export enterprises have to pay attention to demand and cost factors in the future because of raw material and labor price'rise worldwide, decrease of market demand after economic crisis and China's goods'saturation in the international market.