Em­ploy­ment and Wage Ef­fects of RMB Ex­change Rate for Man­u­fac­tur­ing Sec­tors in China and the US*

China Economist - - NEWS - Xu We­icheng ( ) Ocean Univer­sity of China, Qing­dao, China


By cre­at­ing a la­bor mar­ket dy­namic gen­eral equi­lib­rium model, this pa­per de­rives the pass-through mech­a­nism of ex­change rate’s em­ploy­ment and wage ef­fects, car­ries out an em­pir­i­cal study on the em­ploy­ment and wage ef­fects of RMB ex­change rate for man­u­fac­tur­ing sec­tors in China and the United States based on ridge re­gres­sion, and ex­am­ines the role of in­dus­try char­ac­ter­is­tics in this process. Re­search find­ings sug­gest that: RMB de­pre­ci­a­tion will drive em­ploy­ment and wage growth for most of China’s la­bor­in­ten­sive man­u­fac­tur­ing sec­tors, and RMB ap­pre­ci­a­tion will in­crease em­ploy­ment for cer­tain cap­i­tal- and tech­nol­ogy-in­ten­sive sec­tors; but RMB de­pre­ci­a­tion has in­signif­i­cant em­ploy­ment and wage ef­fects for most sec­tors in the US. Hence, in achiev­ing the longterm sta­bil­ity of RMB ex­change rate, China should take ad­van­tage of RMB ap­pre­ci­a­tion’s man­u­fac­tur­ing up­grade ef­fect and en­sure the steady growth of man­u­fac­tur­ing em­ploy­ment. The US should make break­throughs in var­i­ous links of its eco­nomic de­vel­op­ment in or­der to tackle un­em­ploy­ment, in­stead of blam­ing RMB ex­change rate. In ad­di­tion, the nature of busi­ness ac­tiv­i­ties and trade union char­ac­ter­is­tic are both sig­nif­i­cant fac­tors that lead to dif­fer­ences in in­ter-sec­tor em­ploy­ment lev­els of Chi­nese and US man­u­fac­tur­ing sec­tors. Tech­nol­ogy char­ac­ter­is­tic and other mo­nop­o­lis­tic char­ac­ter­is­tics ex­ert de­ci­sive ef­fects on the dif­fer­ence of wage re­turn for var­i­ous sec­tors in China and the US.



RMB ex­change rate, man­u­fac­tur­ing sec­tors, in­dus­trial up­grade, in­dus­try char­ac­ter­is­tics

JEL Clas­si­fi­ca­tion Codes: L60, J23, J31

DOI: 10.19602/j.chi­nae­conomist.2018.03.05

1. In­tro­duc­tion

There has been a long sim­mer­ing de­bate be­tween China and the United States over ex­change rates. The US blamed China for tak­ing ad­van­tage of un­der­val­ued RMB ex­change rate to gain an up­per hand in man­u­fac­tur­ing trade, which led to shrink­ing tra­di­tional man­u­fac­tur­ing sec­tors and job losses in the US. Early when as Repub­li­can pres­i­den­tial can­di­date run­ning for the US pres­i­dency, Don­ald Trump vowed on many oc­ca­sions to list China as a cur­rency ma­nip­u­la­tor and im­pose a 45% tar­iff on goods im­ported from China to cre­ate more jobs for the US. In the fore­see­able fu­ture, China-US ex­change rate spat will con­tinue to fer­ment, giv­ing rise to bi­lat­eral trade fric­tions cen­ter­ing on RMB ex­change rate.

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