Exchange rate appreciation, R&D, and export sophistication: Evidence from China

Sumei Gan and Dingping Cheng

The Journal of International Trade & Economic Development, 2020, vol. 29, issue 2, 237-246

Abstract: Based on panel data of 26 manufacturing industries in China from 2000 to 2010, this paper investigates the impact of exchange rate changes on export sophistication. Utilizing a fixed-effects model, we found that prior to the RMB exchange rate reform in 2005, the RMB exchange rate was significantly negatively correlated with export complexity, while it was significantly positively correlated with export complexity after the exchange rate reform. The appreciation of the RMB brought about by the implementation of the reform policy has significantly improved the sophistication of China’s exports. It was also determined that the appreciation of the RMB significantly augmented the sophistication of China’s exports by promoting R&D investment.

Date: 2020
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DOI: 10.1080/09638199.2019.1657171

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