Impact of Real Effective Exchange Rate of RMB on China’s Value Adding in Global Value Chains

Abstract

The global value chain is a production and supply network that crosses national borders and connects businesses, institutions, and individuals from different countries to create value and produce goods and services. China is an important part of the global value chain, and its position in it has gradually improved. There is a close relationship between the global value chain and currency exchange rates. Studying the impact of RMB exchange rate fluctuations on China’s added value of global value chains is of great significance for a deeper understanding of China’s internationalization process and competitiveness in the global value chain. Based on the global value chain in trade, a regression analysis is conducted on the added value of China in the global value chain. The real effective exchange rate of RMB is used as the interpretation variable, and foreign direct investment, gross domestic product, and consumer price index are included as the control variables in the analysis. The results show that the rise of China’s real effective exchange rate significantly influences the added value in the global value chain even in the global financial crisis of 2008 and the appreciation of the exchange rate improves the production efficiency of China’s processing and manufacturing export companies.