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The Impact of the Exchange Rate and Trade Composition on China’s Trade Balance Vis-à-Vis Selected Partner Countries

Author

Listed:
  • Biswajit Banerjee

    (Ministry of Finance of the Slovak Republic
    Ashoka University)

  • Haiyan Shi

    (International Monetary Fund)

  • Jan Radovan

    (Bank of Slovenia)

  • Yingying Sheng

    (Goldman Sachs International)

  • Xin Li

    (International Monetary Fund)

Abstract

In a departure from most studies, this paper examines in a multivariate context the influence of both the exchange rate and structural factors on China’s trade balance vis-à-vis selected partner countries. Structural change is proxied by the evolution of the labour skill composition of trade. The empirical findings indicate that China’s large trade surplus cannot be attributed to exchange rate policy alone. The large persistent trade surplus also reflects improvement in non-price competitiveness arising from the fact that China’s exports are rising up the skill ladder and imports are moving down the skill ladder.

Suggested Citation

  • Biswajit Banerjee & Haiyan Shi & Jan Radovan & Yingying Sheng & Xin Li, 2017. "The Impact of the Exchange Rate and Trade Composition on China’s Trade Balance Vis-à-Vis Selected Partner Countries," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 59(3), pages 311-344, September.
    • Handle: RePEc:pal:compes:v:59:y:2017:i:3:d:10.1057_s41294-017-0025-5
    DOI: 10.1057/s41294-017-0025-5
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    References listed on IDEAS

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    More about this item

    Keywords

    trade balance; exchange rate; skill composition of trade; revealed comparative advantage; China; United States; EU; India; ASEAN;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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