Exchange Rate, Credit Constraints and China’s International Trade

Description

This book, by one of China's leading economists, explores the past and present of the RMB―the people's currency―as it is poised to compete with the dollar as the international reserve currency.  Exchange rate movement and its pass-through to changes in domestic prices have been topics of wide concern among economists. However, relatively few studies have empirically investigated the relationship between exchange rate movements and China's international trade.This book fills this gap, using the general equilibrium theory of the western economic science norm systems, integrating the leading heterogeneous firm theory of international trade, attempting to set up a theoretical structural model for further prediction, and applying the data from sample cases to examine the structural model. This book will be of interest to economists, financiers, and China watchers. Contents List of Figures List of Tables Chapter 1: Does Appreciation of the RMB Decrease Imports to the US from China? 1 Introduction 2 China’s Exchange Rate Reform 3 Theoretical Gravity Framework 4 Empirical Methodology 5 Data, Econometrics, and Results 5.1 Data 5.2 Main Estimates 5.3 Endogeneity Issues 5.4 Additional Robustness Checks 5.5 Alternative Measures on Exchange Rate 5.6 Further Estimates on Sectoral Heterogeneity 5.7 Additional Estimates with Other Competing Trading Partners 6 Concluding Remarks Appendix References Chapter 2: Revaluation of the Chinese Yuan and Triad Trade: A Gravity Assessment 1 Introduction 2 China’s Exchange Rate and Triad Trade 3 Review of Related Theory 3.1 The Determinants of Bilateral Trade 3.2 The Determinants of the Exchange Rate 3.3 Empirical Methodology 4 Data, Econometrics, and Results 4.1 Data 4.2 The Sino-US Estimates 4.3 The Sino-Japanese Estimates 4.4 Additional Robustness Checks 5 Concluding Remarks References Chapter 3: Exports, Productivity, and Credit Constraints 1 Introduction 2 Exploring the Impact of Credit Constraints on Exports 3 The Model 3.1 Domestic Demand and Production 3.2 The Decision to Export 3.3 The Equilibrium 4 Econometrics, Data, and Measures 4.1 Empirical Specification 4.2 Data 4.3 Measures of TFP 5 Empirical Results 5.1 Main Estimation Results 5.2 The Zero Trade Problem 5.3 Endogeneity Issues 5.4 Additional Robustness Checks Estimates with Narrower Definition of FIEs Estimates Using “All-Scale” Data Estimates Without Productivity Estimation with Labor Productivity Additional Estimates with Ratio Specifications 6 Concluding Remarks Appendix 1: Solving the Cutoffs Appendix 2: TFP Calculation by the Olley–Pakes (1996) Approach References Chapter 4: Exports and Credit Constraints under Incomplete Information 1 Introduction 2 Incentive-Compatible Loans 2.1 The Model 2.2 Domestic Firms’ Decision 2.3 Exporters’ Decision 2.4 Bank’s Decision 3 Estimating Equation and Data 3.1 Empirical Specification 3.2 Firm-Level Data 4 Estimation Results 4.1 The Credit Constraint 4.2 Bivariate Selection Model 4.3 2SLS Estimates 4.4 Collateral of Firms 4.5 Exports by Mode of Transport 4.6 Incomplete Information 5 Conclusions References Chapter 5: Exchange Rate Movements and Exporter Profitability 1 Introduction 2 Model Specification 3 Data 4 Empirical Results 4.1 ROE 4.2 DuPont Analysis 5 Conclusion The Loan Schedules The Cutoff Productivity Levels and the Interest Payment Schedules The Augmented Olley–Pakes (1996) TFP Estimates Solving for the Second Moment of the Export Share References Chapter 6: Export Tightening, Competition, and Firm Innovation 1 Introduction 2 Data 3 Preliminary Analysis 3.1 Background: China’s Exchange Rate Regime Reform and the RMB Appreciation 3.2 Export Tightening 3.3 Firm Innovation 4 Estimating the Impact of the Appreciation on Firm Innovation 4.1 Empirical Strategy 4.2 Results 5 Robustness 5.1 Using One Year Before and After the Shock 5.2 Control for Other Confounding Polices 5.3 Placebo Tests 5.4 Firm Entry and Exit 6 Industry and Firm Heterogeneity 6.1 Industry Heterogeneity 6.2 Firm Heterogeneity 6.3 Processing Versus Nonprocessing Exporters 7 Conclusions Appendix 1: Augmented Olley–Pakes TFP Measures Appendix 2: Construction of Industry Import Penetration Ratio Appendix 3: The Impact of the Appreciation on Firms with Different Export Intensities Appendix 4: Firm Heterogeneity References Chapter 7: Promotion Effect of CNY Appreciation on Export Quality 1 Introduction 2 Accurately Measure the Export Quality at the Micro Level 2.1 Problems of Existing Measurement Methods of Export Quality 2.2 Accurately Measure Export Quality: A New Method at the Micro Level 3 Data Description 4 Empirical Analysis 4.1 Regression Setting and Benchmark Result 4.2 Differences in Quality of Industries 4.3 Discussion on the Competition Mechanism 4.4 Robustness Analysis 5 Conclusion References Chapter 8: Outward Directs Investment, Firm Productivity, and Credit Constraints 1 Introduction 2 Data and Variables 2.1 Firm-Level Data in Zhejiang Province 2.2 Variables 3 Firm Heterogeneity and ODI decision 3.1 Model Specification and Basic Results 3.2 Interaction Effect between Productivity and Financial Constraint 3.3 Robustness Check: First Time Exporting or ODI 4 Firm Heterogeneity and ODI Value 4.1 Model Specification 4.2 Estimation Result 5 Conclusion References Chapter 9: The Effect of RMB Internationalization on Belt and Road Initiative 1 Introduction 2 Literature Review 3 General Effect of RMB Internationalization on the Belt and Road Initiative 4 Impetus of RMB Internationalization for Bilateral Trade 5 Policy Recommendations and Conclusions Appendix References Chapter 10: The Potential Impacts of China–US BIT on China’s Manufacturing Industries 1 Introduction 2 Literature Review 3 Assumptions on the Scenarios of China–U.S. BIT, Focusing on Manufacturing 4 BIT’s Open Market Requirements to China’s Manufacturing Sector and Its Impacts on Relevant Industries 4.1 Impacts of FDI on Domestic Firms 4.2 FDI’s Overall Impacts on Performance of Domestic Firms 4.3 FDI’s Impacts on Specific Industries 4.4 The Effects of Changes in Policies on Scale or Shares of FDI 5 Suggestions on Negotiation Strategy 5.1 Make It Firm and Steadfast that China Is Serious in Joining the BIT 5.2 Protection Measures in the Long Run 5.3 Gradual Lifting Process of Protection for Certain Vulnerable Sectors 5.4 Cooperating the BIT Negotiation with the Domestic Reform 6 Suggestions to Manufacturing Firms Regarding How to Face the Challenges of BIT 6.1 For Domestic Firms 6.2 For Government 7 Conclusions Appendix References References