Processing Trade, Exchange Rates, and the Peopleâ€™s Republic of Chinaâ€™s Bilateral Trade Balances
Abstractï»¿This paper analyzes the role of processing trade in the Peopleâ€™s Republic of China (PRC)â€™s bilateral trade balances and the impact of the yuanâ€™s appreciation on processing trade. The analysis is based on panel data covering the PRCâ€™s 51 trading partners from 1993â€“2008. The empirical analysis shows that : (1) processing trade accounts for 100% of the PRCâ€™s overall trade surplus and can explain most of its bilateral trade balances; (2) the PRCâ€™s processing trade shows a significant regional biasâ€”its processing exports to East Asian economies are three times those to other regions while its processing imports from East Asian economies are eleven times those from other regions; (3) the PRC is one of the major sources of its own processing imports, accounting for 16.8% of its total processing imports from all 51 trading partners; and (4) the appreciation of the yuan would affect both processing imports and exports in the same directionâ€”specifically, a 10% real appreciation of the yuan would reduce not only the PRCâ€™s processing exports by 9.6% but also its processing imports by 3.9%. Therefore, a moderate appreciation of the yuan would have a very limited impact on the PRCâ€™s trade balance.
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Bibliographic InfoPaper provided by East Asian Bureau of Economic Research in its series Macroeconomics Working Papers with number 23266.
Date of creation: Mar 2011
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Processing Trade; exchange rates; Bilateral Trade Balances; PRC;
Other versions of this item:
- Yuqing Xing, 2011. "Processing Trade, Exchange Rates, and the Peopleâ€™s Republic of Chinaâ€™s Bilateral Trade Balances," Trade Working Papers 23266, East Asian Bureau of Economic Research.
- F1 - International Economics - - Trade
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-21 (All new papers)
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- Zhou, Jing & Latorre, María C., 2013. "The impact of FDI on the production networks between China and East Asia and the role of the U.S. and ROW as final markets," MPRA Paper 51384, University Library of Munich, Germany.
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