Exchange Rate Movements and Exporter Profitability: Empirical Evidence from Chinese Manufacturing Sectors

Abstract

Most products exported by Chinese manufacturing firms are characterized by high labor-intensity and low markup. Renminbi (RMB) appreciation undoubtedly worsens this situation as exporters have to pay RMB-denominated wages and charge dollar-denominated prices. This paper studies the correlation between exchange rate movements and the profitability of exporters. We find significant negative effects of RMB appreciation on the profitability of exporters.

Keywords:

• Exchange Rate
• Profitability
• ROE

JEL:

• F14
• F31
• F61