Economics of Planning

, Volume 34, Issue 1, pp 89–112

China's Exchange Rate Reform and Exports

Authors

  • Zhichao Zhang
    • St. Antony's CollegeOxford University
Article

DOI: 10.1023/A:1017549828555

Cite this article as:
Zhang, Z. Economics of Planning (2001) 34: 89. doi:10.1023/A:1017549828555

Abstract

The paper argues that exchange rate reform is a vital supply-side factor in China's export growth. It contributes to China's export expansion by affording a realistic exchange rate and allowing freer access to foreign exchange, thereby leading to the reduction of anti-export bias and strong supply response. In an imperfect substitutes model, China's long-run export supply and demand functions are estimated in a system context. Evidence is found that the exchange rate reform is one of the most influential factors in China's long-run export expansion, inducing significant response of exports supply. In the short-run, the exchange rate reform and the export volume are also cross-linked through the error-correction process. China's exchange rate policy adjusts speedily to ensure the long-run equilibrium of the supply-side relationship and is likely to have played a dominant role in the adjustment. The study confirms, thanks to the exchange rate reform, China's exchange rate policy has benefited China's remarkable growth of exports before 1994.

economic reformexchange rate policyexportscointegration analysis

Copyright information

© Kluwer Academic Publishers 2001