Abstract
This paper empirically discusses the impact of exchange rate fluctuations on enterprises’ export decisions by using the annual data of the database of China’s industrial enterprises and the database of China’s customs merged according to the hs6-digit code from 2000 to 2007. The study found that: 1) the appreciation of RMB real effective exchange rate will significantly increase the probability of enterprises exiting export markets and reduce the probability of enterprises entering export markets; 2) compared with state-owned enterprises and private enterprises, foreign-owned enterprises have stronger ability to fight against exchange rate risks, and enterprises in eastern China are more sensitive to exchange rate fluctuation; 3) based on the analysis of heterogeneity of enterprise characteristics, it is found that such factors as enterprise productivity, enterprise profit margin, enterprise size and enterprise export experience can reduce the positive impact of RMB real effective exchange rate appreciation on enterprises exiting from export markets. This paper provides some useful advice for enterprises to avoid exchange rate risks and make better export decisions.
Highlights
Since China joined the WTO, China’s export trade has shown an “extraordinary” prosperity
The study found that: 1) the appreciation of RMB real effective exchange rate will significantly increase the probability of enterprises exiting export markets and reduce the probability of enterprises entering export markets; 2) compared with state-owned enterprises and private enterprises, foreign-owned enterprises have stronger ability to fight against exchange rate risks, and enterprises in eastern China are more sensitive to exchange rate fluctuation; 3) based on the analysis of heterogeneity of enterprise characteristics, it is found that such factors as enterprise productivity, enterprise profit margin, enterprise size and enterprise export experience can reduce the positive impact of RMB real effective exchange rate appreciation on enterprises exiting from export markets
Considering that enterprises are faced with exchange rate appreciation, what this paper is more interested in is the marginal impact of enterprise characteristics on the probability of enterprises exiting, will it increase or reduce the probability of enterprises to exiting from export markets? This will be the focus of this part of the study
Summary
Since China joined the WTO, China’s export trade has shown an “extraordinary” prosperity. During this period, net exports, one of the “troikas” driving China’s economic development, gave a big boost to China’s economic growth. China’s exports value and export growth slowed sharply, in 2009 China’s total exports value was only $120.2 billion and the export growth started a sharp decline into 16.01%. From 2009 to 2014, China’s export value had been in a slow growth stage, but the export growth rate gradually declined. China’s trade growth rate in 2015 and 2016 was −2.94% and −7.73% respectively. Global trade has entered a period of profound adjustment, which has inhibited China’s export growth. Scholars at home and abroad have investigated the impact of these factors on enterprises’ export decisions from the perspectives of export country characteristics (Osnago et al, 2015), export product types (Hess & Persson, 2011), enterprise characteristics (Gorg et al, 2012), and trade policy uncertainty (Handley, 2014). Few scholars have studied the export decisions of enterprises from the perspective of exchange rate fluctuations
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