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China's Exchange Rate Reform and Exports

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  • Zhang, Zhichao

Abstract

The paper argues that exchange rate reform is a vital supply-side factor in China's export growth. It contributes to China's export expansion by affording a realistic exchange rate and allowing freer access to foreign exchange, thereby leading to the reduction of anti-export bias and strong supply response. In an imperfect substitutes model, China's long-run export supply and demand functions are estimated in a system context. Evidence is found that the exchange rate reform is one of the most influential factors in China's long-run export expansion, inducing significant response of exports supply. In the short-run, the exchange rate reform and the export volume are also cross-linked through the error-correction process. China's exchange rate policy adjusts speedily to ensure the long-run equilibrium of the supply-side relationship and is likely to have played a dominant role in the adjustment. The study confirms, thanks to the exchange rate reform, China's exchange rate policy has benefited China's remarkable growth of exports before 1994. Copyright 2001 by Kluwer Academic Publishers

Suggested Citation

  • Zhang, Zhichao, 2001. "China's Exchange Rate Reform and Exports," Economic Change and Restructuring, Springer, vol. 34(1-2), pages 89-112.
    • Handle: RePEc:kap:ecopln:v:34:y:2001:i:1-2:p:89-112
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    Cited by:

    1. Chi-Wei Su, 2012. "The relationship between exchange rate and macroeconomic variables in China," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 30(1), pages 33-56.
    2. BAAK, SaangJoon, 2008. "The bilateral real exchange rates and trade between China and the U.S," China Economic Review, Elsevier, vol. 19(2), pages 117-127, June.
    3. Zhang, Yin & Wan, Guanghua, 2007. "What accounts for China's trade balance dynamics?," Journal of Policy Modeling, Elsevier, vol. 29(6), pages 821-837.
    4. Zain Ahmed, 2014. "Factors Affecting Exchange Rate Fluctuation in Pakistan," International Journal of Social Sciences and Management Studies (IJSSMS), The Economics and Social Development Organization (TESDO), vol. 1(2), pages 80-88, June.
    5. Julio Bicudo & Nnanna Azu, 2018. "Effects of Bilateral Real Exchange Rate on Sino-Nigeria Trade: An ARDL Cointegration Approach," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 10(7), pages 125-125, July.
    6. Zhang, Yin & Wan, Guanghua, 2008. "Correcting China's trade imbalance: Monetary means will not suffice," Journal of Policy Modeling, Elsevier, vol. 30(3), pages 505-521.
    7. Mohsen Bahmani-Oskooee & Jia Xu, 2012. "Impact of exchange rate volatility on commodity trade between U.S. and China: is there a third country effect," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 36(3), pages 555-586, July.
    8. Chan, Tze-Haw, 2014. "Trade Balance, Foreign Exchange and Macroeconomic Impacts: An Empirical Assessment for China and Malaysia," MPRA Paper 59539, University Library of Munich, Germany, revised 10 Aug 2014.
    9. Saang Joon Baak, 2006. "The Impact of the Chinese Renminbi on the Exports of the ROK and Japan to the US (ROK Economic System Series No.10)," Discussion papers 0604e, ERINA - Economic Research Institute for Northeast Asia.
    10. Lin, Guijun & Schramm, Ronald M., 2003. "China's foreign exchange policies since 1979: A review of developments and an assessment," China Economic Review, Elsevier, vol. 14(3), pages 246-280.
    11. Paresh Kumar Narayan & Russell Smyth, 2006. "The dynamic relationship between real exchange rates, real interest rates and foreign exchange reserves: empirical evidence from China," Applied Financial Economics, Taylor & Francis Journals, vol. 16(9), pages 639-651.
    12. Utku UTKULU & Dilek SEYMEN & Aydin ARI, 2010. "Export Supply and Trade Reform: The Turkish Evidence," EcoMod2004 330600144, EcoMod.
    13. Chan, Tze-Haw & Hooy, Chee-Wooi, 2010. "China-Malaysia’s Trading and Exchange Rate: Complementary or Conflicting Features?," MPRA Paper 25546, University Library of Munich, Germany.
    14. Maozu Lu & Zhichao Zhang, 2003. "Exchange rate reform and its inflationary consequences: an empirical analysis for China," Applied Economics, Taylor & Francis Journals, vol. 35(2), pages 189-199.
    15. Saang Joon Baak, 2006. "The Impact of the Chinese Renminbi on the Exports of the ROK and Japan to the US (ROK Economic System Series No.10)," Discussion papers 0604, ERINA - Economic Research Institute for Northeast Asia.
    16. Chan, Tze-Haw & Hooy, Chee-Wooi, 2011. "China-Malaysia’s long run trading and exchange rate: complementary or conflicting?," MPRA Paper 33585, University Library of Munich, Germany.
    17. Tang, Tuck Cheong, 2003. "An empirical analysis of China's aggregate import demand function," China Economic Review, Elsevier, vol. 14(2), pages 142-163.
    18. Upadhyaya, Kamal & Bhandari, Rabindra & Mixon, Franklin G. JR., 2020. "Exchange Rate Volatility and its Impact on China's Trade with the United States," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(3), pages 373-388.
    19. Mohsen Bahmani‐Oskooee & Yongqing Wang, 2006. "The J Curve: China Versus Her Trading Partners," Bulletin of Economic Research, Wiley Blackwell, vol. 58(4), pages 323-343, October.
    20. Yongqing Wang & Guanghua Wan, 2008. "China's Trade Imbalances: The Role of FDI," WIDER Working Paper Series RP2008-103, World Institute for Development Economic Research (UNU-WIDER).
    21. Hongjin Xiang & Zheng Zhan & Mingyong Lai, 2011. "The trade destruction effect and trade diversion effect of RMB appreciation," Frontiers of Economics in China, Springer;Higher Education Press, vol. 6(3), pages 479-493, September.
    22. Mohammadi, Hassan & Yue, Kan, 2012. "On Trade Balance and Exchange Rates: Further Evidence from China’s Bilateral Trade - La bilancia commerciale e i tassi di cambio: ulteriori evidenze dalle bilance commerciali bilaterali cinesi," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 65(4), pages 581-604.

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