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Effects of renminbi appreciation on foreign firms: The role of processing exports

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  • Eichengreen, Barry
  • Tong, Hui

Abstract

We examine the impact of Chinese currency (renminbi) revaluation on firm valuations, focusing on the effect of surprise announcements of changes in China's currency policy on 9753 manufacturing firms in 44 countries. Renminbi appreciation has no significant impact on the valuation of firms in sectors exporting to China on average. But this “non-result” confounds a positive effect on firms in sectors exporting final goods to China with a negligible effect on those providing inputs for China's processing exports. We also find no significant effect on firms in sectors competing with China at home and in third markets. But again this “non-result” confounds the positive effect on firms competing with China in final goods with an insignificant effect on firms competing with China's processing exports. When evaluating the effects of renminbi appreciation on other countries, it follows, distinguishing processing trade from trade in final goods is key.

Suggested Citation

  • Eichengreen, Barry & Tong, Hui, 2015. "Effects of renminbi appreciation on foreign firms: The role of processing exports," Journal of Development Economics, Elsevier, vol. 116(C), pages 146-157.
    • Handle: RePEc:eee:deveco:v:116:y:2015:i:c:p:146-157
    DOI: 10.1016/j.jdeveco.2015.04.004
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    6. Fatum, Rasmus & Liu, Runjuan & Tong, Jiadong & Xu, Jiayun, 2018. "Beggar thy neighbor or beggar thy domestic firms? Evidence from 2000 to 2011 Chinese customs data," Journal of International Economics, Elsevier, vol. 115(C), pages 16-29.
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    8. Ahmed,Swarnali & Appendino,Maximiliano Andres & Ruta,Michele, 2015. "Depreciations without exports ? global value chains and the exchange rate elasticity of exports," Policy Research Working Paper Series 7390, The World Bank.
    9. SATO Kiyotaka & Shajuan ZHANG, 2019. "Do Exchange Rates Matter in Global Value Chains?," Discussion papers 19059, Research Institute of Economy, Trade and Industry (RIETI).
    10. Mao, R., 2018. "A Firm-Level Reappraisal of Real Exchange Rate Undervaluation in China s Agricultural Exports and Growth," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 276987, International Association of Agricultural Economists.

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    More about this item

    Keywords

    Renminbi appreciation; Firm valuations; Processing exports;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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