Research on the Impact of Sino-US Trade Structure on the Real Effective Exchange Rate of RMB

Since the beginning of 2018, Sino-US trade frictions have been escalating to the fields of science and technology, finance, and geography. Especially in the financial field, the United States has forcibly identified China as a “currency manipulator.” In order to analyze the impact of Sino-US trade on the RMB exchange rate, based on the Sino-US import and export trade data under the quarterly HS classification from 2003 to 2019 and the RMB real effective exchange rate, this article carries out the traditional time series test, seasonal unit root test, and cointegration test and further constructs the seasonal error correction model to explore the long-term and short-term dynamic impact of Sino-US import and export trade structure on RMB real effective exchange rate. The results shows that the upgrading and optimization of the overall trade structure between China and the United States will increase the appreciation pressure of RMB real effective exchange rate. There are seasonal and long-term trends between RMB real effective exchange rate and different types of import and export trade structures between China and the United States. Therefore, this article not only strongly refutes the “theory of RMB appreciation” and puts forward policy suggestions to effectively deal with the negative impact of Sino-US trade friction but also provides a research framework for global trade, especially the decoupling of trade structure and exchange rate between developing and developed countries.

The Effect of Real Effective Exchange Rate Changes on China’s Import Trade Structure

The real effective exchange rate (REER) has a double effect on the value of imports. The appreciation of the real effective exchange rate directly reduces the price of imports and expands the quantity of imports, but the increase in the quantity of imports will stimulate the rise of import prices and indirectly restrain the quantity of imports. Using ADF unit root test, cointegration analysis and Granger’s causality test, this paper empirically studies the relationship between the real effective exchange rate of RMB and the consumption trade imports, total trade imports and import trade structure from 1997 to 2019. The conclusion shows that the appreciation of the real effective exchange rate of RMB will reduce the total trade imports and increase the proportion of consumption trade imports, but the effect of that on consumption trade imports is not clear. Results of this study provide evidence that the price effect of RMB’s real effective exchange rate is greater than the income effect of GDP growth. The price elasticity is 0.96 times the income elasticity for consumption trade imports, 2.45 for total trade imports, and 15.24 times for import trade structure.

Informal Economies and International Trade

This dissertation studies the role of informal producers in determining the pattern of production and the trade structure of developing countries, and provides an understanding of the channels through which informal producers influence the outcome of trade. The second chapter examines the characteristics of informal workers in the Turkish export-oriented manufacturing industries using descriptive statistics and econometric analysis. We find that informality is highest among female workers with lower education levels who mainly operate from home, and report that the textile and clothing industries, which Turkey has a comparative advantage in the world market, have a share of informality. This finding inspires the third and fourth chapters. In the third chapter, informal producers directly export their products in the global market. We build a Ricardian model of trade with labour market frictions that justify the presence of informal producers. We find that the size of the informal sector is affected by not only a country's own labour market structure, but also by its trading partners' labour market frictions. We show that a decrease in trade costs results in an increase in the size of the informal sector in countries with relatively higher labour market rigidities, and a reduction of informality in their trading partners. The fourth chapter, which is joint work with professor Claustre Bajona, develops a theoretical framework with stages of production to investigate the role of informal producers in the supply chain. To quantify the changes in labour and trade policies on the trade structure of countries, we calibrate the model to the Turkish and German economies in 2003. In the model, informal producers may influence the comparative advantage of countries by supplying lower cost inputs to formal producers that compete in the global arena. In our calibrated model, second stage formal production is higher under a protectionist economy in a country with higher labour market frictions. This results in a larger informal sector due to the interlinkage between formal and informal producers in the production chain.

Informal Economies and International Trade

This dissertation studies the role of informal producers in determining the pattern of production and the trade structure of developing countries, and provides an understanding of the channels through which informal producers influence the outcome of trade. The second chapter examines the characteristics of informal workers in the Turkish export-oriented manufacturing industries using descriptive statistics and econometric analysis. We find that informality is highest among female workers with lower education levels who mainly operate from home, and report that the textile and clothing industries, which Turkey has a comparative advantage in the world market, have a share of informality. This finding inspires the third and fourth chapters. In the third chapter, informal producers directly export their products in the global market. We build a Ricardian model of trade with labour market frictions that justify the presence of informal producers. We find that the size of the informal sector is affected by not only a country's own labour market structure, but also by its trading partners' labour market frictions. We show that a decrease in trade costs results in an increase in the size of the informal sector in countries with relatively higher labour market rigidities, and a reduction of informality in their trading partners. The fourth chapter, which is joint work with professor Claustre Bajona, develops a theoretical framework with stages of production to investigate the role of informal producers in the supply chain. To quantify the changes in labour and trade policies on the trade structure of countries, we calibrate the model to the Turkish and German economies in 2003. In the model, informal producers may influence the comparative advantage of countries by supplying lower cost inputs to formal producers that compete in the global arena. In our calibrated model, second stage formal production is higher under a protectionist economy in a country with higher labour market frictions. This results in a larger informal sector due to the interlinkage between formal and informal producers in the production chain.

Research on the Influence of Shanghai Import Trade Structure on Technological Progress

Based on the statistical data from 1995 to 2018, this paper uses regression analysis, error correction model and impulse response analysis to empirically test the specific impact of import trade structure on Shanghai's technological progress. The results show that the decrease in the proportion of intermediate goods imports promotes the technological progress, while the increase in the proportion of capital goods imports has a significant positive impact on Shanghai's technological progress. The relationship between FDI and technological progress in Shanghai is negative. The development of Finance and the increase of patent authorization promote the technological progress of Shanghai. The stability test of VEC model shows that there is a long-term equilibrium and stable relationship among the variables. Impulse response analysis shows that there is a bidirectional interaction between the import trade structure and Shanghai's technological progress. Therefore, we should further reduce the quantity of intermediate goods with low technology content and increase the import volume of capital goods appropriately. At the same time, we should attach importance to innovation based on introduction and absorption, and use the platform of China International Import Expo to attract foreign enterprises to widely display new products, new technologies and new services of various countries, so as to help high-quality development in the future.