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Investigating China's Disaggregated Processed Exports: Evidence that the RMB matters

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  • Willem THORBECKE

Abstract

China's trade surplus is entirely in processing trade. Processed exports are final goods produced using parts and components coming from East Asian supply chain countries. Many claim that because much of the value added of China's processed exports comes from East Asian countries, exchange rates in supply chain countries should affect China's processed exports and the renminbi should not. To investigate these issues, this paper disaggregates processed exports into their two main categories—processing with imported materials (PWIM) exports and processing and assembly (PAA) exports. For PWIM exports, much of the value added comes from China, while for PAA exports, most of the value-added comes from supply chain countries. Dynamic ordinary least squares (DOLS) results indicate that East Asian exchange rates affect both types of exports and that the renminbi significantly affects PWIM exports but not PAA exports. Since PWIM exports are now six times the value of PAA exports, these results indicate that the renminbi matters for aggregate processed exports.

Suggested Citation

  • Willem THORBECKE, 2012. "Investigating China's Disaggregated Processed Exports: Evidence that the RMB matters," Discussion papers 12003, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:12003
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    References listed on IDEAS

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    1. Cheung, Yin-Wong & Chinn, Menzie D. & Qian, XingWang, 2012. "Are Chinese trade flows different?," Journal of International Money and Finance, Elsevier, vol. 31(8), pages 2127-2146.
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    5. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2008. "How Much of Chinese Exports is Really Made In China? Assessing Domestic Value-Added When Processing Trade is Pervasive," NBER Working Papers 14109, National Bureau of Economic Research, Inc.
    6. Barry Eichengreen & Yeongseop Rhee & Hui Tong, 2004. "The Impact of China on the Exports of Other Asian Countries," NBER Working Papers 10768, National Bureau of Economic Research, Inc.
    7. Thorbecke, Willem, 2011. "Investigating the effect of exchange rate changes on china's processed exports," Journal of the Japanese and International Economies, Elsevier, vol. 25(2), pages 33-46, June.
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    9. ITO Takatoshi & KOIBUCHI Satoshi & SASAKI Yuri & SATO Kiyotaka & SHIMIZU Junko & HAYAKAWA Kazunobu & YOSHIMI Taiyo, 2008. "Currency Invoicing and Foreign Exchange Risk Management: A Case Study of Japanese Firms (Japanese)," Discussion Papers (Japanese) 08009, Research Institute of Economy, Trade and Industry (RIETI).
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    Cited by:

    1. THORBECKE, Willem, 2012. "The Short- and Long-Run Effects of Exchange Rate Changes on the Japanese Electronics Industry," Discussion papers 12019, Research Institute of Economy, Trade and Industry (RIETI).

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