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

34 Pages Posted: 13 Jun 2018

See all articles by Biswajit Banerjee

Biswajit Banerjee

Haverford College

Haiyan Shi

International Monetary Fund (IMF)

Jan Radovan

Bank of Slovenia

Yingying Sheng

Goldman Sachs International

Xin Li

International Monetary Fund (IMF)

Date Written: June 2017

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.

Keywords: trade balance, exchange rate, skill composition of trade, revealed comparative advantage, China, United States, EU, India, ASEAN

Suggested Citation

Banerjee, Biswajit and Shi, Haiyan and Radovan, Jan and Sheng, Yingying and Li, Xin, The Impact of the Exchange Rate and Trade Composition on China's Trade Balance Vis-À-Vis Selected Partner Countries (June 2017). Comparative Economic Studies, Vol. 59, Issue 3, 2017. Available at SSRN: https://ssrn.com/abstract=3193608 or http://dx.doi.org/10.1057/s41294-017-0025-5

Biswajit Banerjee (Contact Author)

Haverford College ( email )

Haverford, PA 19041
United States

Haiyan Shi

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jan Radovan

Bank of Slovenia

Slovenska cesta 35
Slovenija, 1505
Slovenia

Yingying Sheng

Goldman Sachs International

United Kingdom

Xin Li

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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