The Effect Of RMB Appreciation On The International Competitiveness Of Manufacturing Industry

In July2005, China carried out its managed floating exchange rate system based on market supply, with reference to package currencies, which contributed greatly to economic growth and foreign trade. RMB appreciated stably since. However RMB appreciation had influenced the manufacturing industry. Many theories and practice showed that it had affected the export, employment, foreign direct investment of manufacturing industry. And according to the international competitiveness theory, RMB appreciation can have an effect on the international competitiveness of manufacturing industry via these variables through the transmission mechanism.Firstly, the paper studies the theories of how the appreciation of RMB affects the manufacturing industry and theories of international competitiveness. And the research sums up the influence rules between appreciation of RMB and the international competitiveness of manufacturing industry. Then it introduces RMB appreciation history and the international competitiveness of Chinese manufacturing industry, finding that the RMB exchange rate has been on a steady rise since2000. Trough the analysis of TC index and RCA index, the study gets a conclusion that industries with strong international competitiveness are textile garment and garment accessories manufacturing, industries with relatively strong international competitiveness include wood processing and furniture manufacturing, fabricated metal products, etc, industries with weak international competitiveness are chemical industry, medicine industry and special equipment manufacturing etc. On the basis, this paper selects16representative manufacturing industry of China, with TC index and RCA index as the dependent variables, RMB real effective exchange rate, unit labor costs and foreign direct investment as the independent variables, to testify the mechanism through the panel data model. The results show that RMB appreciation has caused negative influence to the international competitiveness of labor intensive industry, while greatly improved the international competitiveness of capital and technology intensive industry. Finally, this paper puts forward some suggestions to improve the international competitiveness of manufacturing industry under the perspective of RMB appreciation.