Effects of renminbi appreciation on foreign firms: The role of processing exports

Barry Eichengreen and Hui Tong

Journal of Development Economics, 2015, vol. 116, issue C, 146-157

Abstract: We examine the impact of Chinese currency (renminbi) revaluation on firm valuations, focusing on the effect of surprise announcements of changes in China's currency policy on 9753 manufacturing firms in 44 countries. Renminbi appreciation has no significant impact on the valuation of firms in sectors exporting to China on average. But this “non-result” confounds a positive effect on firms in sectors exporting final goods to China with a negligible effect on those providing inputs for China's processing exports. We also find no significant effect on firms in sectors competing with China at home and in third markets. But again this “non-result” confounds the positive effect on firms competing with China in final goods with an insignificant effect on firms competing with China's processing exports. When evaluating the effects of renminbi appreciation on other countries, it follows, distinguishing processing trade from trade in final goods is key.

Keywords: Renminbi appreciation; Firm valuations; Processing exports (search for similar items in EconPapers)
JEL-codes: F1 F4 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:116:y:2015:i:c:p:146-157

DOI: 10.1016/j.jdeveco.2015.04.004

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