The Influence Of Exchange Rate Movements On Firm's Degree Of Embedding In Global Value Chain

Benefiting from the revolution of science and technology,the world division of labor is becoming widening and deepening,and gradually evolved into “The System of Global Value Chain Division of Labor”.Under this system,using only the traditional way to calculate the sum of trade could not truly measure the real benefit that a country(region)gets from the trade.As the world's biggest economy of trade in goods,China has maintained a positive attitude towards participating in the division system of the world value chain.In this paper,based on the combined data of China Industrial Firms Data(CIFD)and Chinese Customs Trade Statistics(CCTS)between 2000 and 2006,we use four different methods to calculate the foreign value added rate(FVAR)in exporting of China's manufacturing firms.As per our results,during the period of 2000-2006,the FVAR of China's exporting firms is over 50%,but over the seven years,it has declined nearly 10 percent,and processing trade is the main force of decreasing;Hong Kong,Macao and Taiwan enterprises,as well as foreign company,has the highest FVAR;technology and capital intensive industries shows the minimum decrease,however,labor intensive industries has the maximum fall;finally,the FVAR of exporting to developed countries is higher than exporting to the ASEAN countries.As an import price level,exchange rate is closely related to a country's foreign trade.Since July 2005,when China started the revolution of the exchange rate formation mechanism of Renminbi,the issue on appreciation of Renminbi has become one of the key focuses to economists.Based on the Heterogeneous Firms Theory and the concerned research,we use the exporting FVAR that we calculated as the explained variable,and take exchange rate and firm heterogeneity like productivity as the explanatory variables,to explore the influencing factors of China's embedding in global value chain.As per our empirical results,in general,the appreciation of renminbi and the promotion of productivity could significantly promote the exporting FVAR of China's firms,but these two factors have different impact on different modes of trade and different industries.On the whole,this paper has provided a new micro perspective to analyze China's participation in global value chain.