The Influence Of Appreciation Of RMB On Export Comparative Advantage

In recent years, topic about the exchange rate of RMB has been animportant point in trade frictions between China and US. This paper linksthe exchange rate of RMB to export comparative advantage, analyzes themechanism how appreciation of RMB can improve China’s exportcomparative advantage, defines two effects that work in it, as well as doan empirical research with China’s export data.The appreciation of RMB improves China’s export comparativeadvantage through two effects: crowding-out effect and promoting effect.The promoting effect means that the appreciation of RMB can increaseK/L, which promotes the capital/technology intensive producers to enterinto the market. The crowding-out effect means that the appreciation ofRMB cut more income on labor intensive producers than oncapital/technology intensive producers, which causes the labor intensiveproducers leave the market.This paper uses the seasonal data on2005-2012to do regressions onexport equation and export price equation. The result shows that theappreciation of RMB has negative effects on all industrial products.However, the negative effects on capital/technology intensive producersare less than those on labor intensive producers, which is anticipated bythe model. Moreover, the result of panel regression on16main exportcountries suggests that, the appreciation of RMB is one of the mostimportant factors that influence Chinas’ export comparative advantage.The appreciation of RMB increases the export comparative advantage ofcapital/technology intensive products, and decreases the export comparative advantage of labor intensive products. And, it improves theChina’s export comparative advantage on total.