Abstract
Since China's reform and opening up, the rapid development of processing trade has made positive contributions to China's economic development. Development of processing trade in China is mainly affected by two factors. One is the low wages in enterprises engaging in processing trade, the other is the undervalued RMB exchange rate. This paper aims to reveal the respective effect of the two factors on the export of processing trade in China. This paper takes use of time-series econometric model and the empirical analysis shows that the improvement of wage level can raise China's processing trade exports, but the appreciation of the RMB exchange rate will hinder China's processing trade exports. At present, raising the minimum wage level of the export processing enterprises and stabilizing the RMB exchange rate are beneficial for China's processing trade exports.
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