Abstract
Based on Chinese industrial firm information and international transaction data from 2003 to 2013, we construct a currency overvaluation index across 297 cities in China. Using the innovative index, we present that currency overvaluation significantly promotes export product quality of Chinese manufacturing enterprises, which is conceivably due to increased import of intermediate goods. Heterogeneity analysis reveals that the impact is more pronounced for medium-sized firms, domestic invested firms, and firms in non-mega cities. By investigating the driving forces of export product quality improvement, we provide clear policy implications for government and firms pursuing long-term development.
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