| Abstract: |
This paper uses a firm level multi-industry data set covering 456 Chinese
manufacturing sectors to assess the implications of Renminbi (RMB) real
exchange rate appreciation for adjustments in employment and wage rates. We
stress differences in both industry and firm characteristics within sectors.
Our empirical results show that modest (and also larger) RMB real exchange
rate appreciation would likely have pronounced effects on both net employment
and wage rates. A 10% RMB appreciation would likely cause a net employment
decline in Chinese manufacturing industries of between 4.1% and 5.3%, and a
wage rate drop of 4% after controlling for other factors. Real exchange rate
change effects by industry on net employment and wage rates vary significantly
with the ownership characteristics of firms within industries. Employment and
wage rates for private enterprises are less responsive to RMB real exchange
rate fluctuations than is true for state owned enterprises (SOEs) and foreign
invested enterprises (FIEs). This finding is opposite to the widely held
belief that the labor market behavior of Chinese SOEs shows stronger labor
market rigidities than for private firms. Impacts of exchange rate movements
emerge as systematically related to export openness, overall import
penetration and profit margins of individual manufacturing industries. |