Abstract

With the development of economic globalization, the industrial structure and the way of globalization in the world have changed obviously. After the industry transfer of developed countries, a large proportion of the developing countries represented by China have no development model change on the traditional laborintensive industries and resource-intensive industries, which caused traditional manufacturing development excessively and easy to be locked in the lower part of the global value chain in the vertical specialization as well as structural imbalance among the three industries. At the same time, the exchange rate, as an important price signal, is affecting a country's resource allocation and industrial development process. With the acceleration on the reform of the RMB exchange rate, the exchange rate plays a more and more important role in the economic development of our country, and the RMB exchange rate issue also has attracted world attention. Therefore, start from the current real effective exchange rate formation mechanism in the vertical specialization, and based on the analysis of China's current industrial development, this paper discusses the impact of RMB exchange rate changes on domestic industrial structure adjustment and total factor productivity, which not only provide support for the full use of the RMB exchange rate to achieve the optimization of domestic industrial structure and the improvement of TFP, but also have very important theoretical value and practical significance to develop more reasonable exchange rate policy and industrial policy to participate in the process of economic globalization for China.

This paper studies the impact of the RMB exchange rate on the industrial upgrading in China by following the research methods of normative analysis and em pirical analysis, qualitative research and quantitative research, and combining the theory of international income and expenditure, international investment and exchange rate. The full text is divided into seven chapters, and the main content of each chapter is as follows：

The chapter one is introduction. Based on the description of the industrial development on the whole under the trend of economic globalization, this paper puts forward the basic fact of RMB appreciation, and briefly explains the framework of main content as well as the purpose of this study, the research significance, main research methods and innovation points.

The chapter two is literature review. This chapter firstly puts forward the definition of industrial upgrading, and then reviews related literatures from four aspects, which mainly include the brief introduction and review of the elements in traditional real effective exchange rate; summaries of the investigation and analysis of the RMB real effective exchange rate by previous scholars; detailed analysis on the impact of exchange rate changes on the industrial structure and systematic description on the impact of exchange rate changes on technological progress. Finally, this chapter does some reviews based on the summary of previous research results.

The chapter three is the measurement of RMB real effective exchange rate. Bassed on the summary of the related concepts of exchange rate, this chapter determines to use the real effective exchange rate for the application and analysis on RMB exchange rate. Next, through the comparative study of the effectiveness and feasibility in value-added accounting methods, this chapter determines that the value-added real effective exchange rate of RMB will be measured in the framework of the world input-output table.

The chapter four is the analysis of the evolution of China's industrial development. Firstly, this chapter analyzes structure characteristics of China's three industries from the overall and regional level. In the analysis of vertical specialization, this chapter studies the value added, the value-added rate and the status of the division of labor from the general and the sub-industry level.

The chapter five is the study on the impact of RMB exchange rate changes on China's industrial structure upgrading. This chapter firstly calculates the provincial rationalization and advancement of industrial structure indicators. According to the derived equation of exchange rate and industrial and the corresponding influence mechanism, this chapter studies the impact of RMB exchange rate changes on rationalization and advancement of China's industrial structure through regression analysis.

The chapter six is the study on the impact of RMB exchange rate changes on China's total factor productivity. This chapter firstly makes a relative description of the relationship between total factor productivity and industrial upgrading, and then we use the DEA Malmquist index to calculate and analyze the total factor productivity on China's industry level. We study the impact of RMB exchange rate changes on the total factor productivity among Chinese manufacturing industries by the measured RMB value-added real effective exchange rate based on the mechanism analysis of the impact of RMB real effective exchange rate on the productivity.

The chapter seven is conclusion and policy suggestions. This chapter firstly summarizes the measurement of RMB value-added real effective exchange rate, the evolution of industry development in our country and the impact of RMB exchange rate changes on the two manifestations of China's industrial upgrading. Then, according to the research conclusion, this chapter discusses the policy implications of the RMB exchange rate changes and the strategic choice of China's industrial upgrading. Finally, this chapter puts forward the shortcomings of the study and the research prospects in future.

According to the research above, the main conclusions are as follows：

Firstly, there are significant differences for the appreciation space of RMB value-added real effective exchange rate among the primary industry, secondary industry and the tertiary industry. The exchange rate appreciation of China's tradable goods traditionally is higher than that of non-tradable goods. Specifically, the exchange rate appreciation of China's manufactured goods is generally higher than that of the primary products, and the exchange rate appreciation of the service industries which has close relationship with goods is also higher than that of the other service less involved in the trade process of goods.

Secondly, the proportion of the value added in primary industry decreased significantly, which is basically stable in secondary industry and increased rapidly in tertiary industry after reform and opening-up in our country. As domestic value added increasing in exports, the value-added rate of domestic exports appeares decline in varying degrees in overall level and industry-level except several industries in China, which leads a substantial fluctuation for China's status of vertical specialization.

Thirdly, there are significant differences in the rationalization index of industrial structure among regions. The rationalization index of most provinces shows a downward trend. From the advancement perspective, provincial advancement of industrial structure still has comparatively large difference. In overall level, regional level and the level of period of time, the appreciation of RMB is not conducive to the development in the direction of rationalization of industrial structure, but has a favorable effect on the advancement of industrial structure in our country.

Fourthly, the appreciation of RMB has significant influence on our country's manufacturing total factor productivity on the whole, but also has different influence on the improvement of China's total factor productivity for manufacturings with different capital-labor ratio. Due to the higher adjustment cost of their capital, the appreciation of RMB doesn't have significant impact on the total factor productivity for an industry with higher capital-labor ratio. By contrast, the appreciation of RMB has a certain role in promoting the total factor productivity for industry with lower capital-labor ratio.

Therefore, this paper argues that, in the aspect of formulating exchange rate policy, it is necessary to form the exchange rate system suited to China's industrial upgrading from the elements of value-added real effective exchange rate. In the formulation and implementation of supporting policies, at the same time, it is also necessary to make the maximum elimination in the process of negative impact for exchange rate in the moderate appreciation, and adapt industrial policy suited to China's industrial upgrading.

This paper tries to innovate from the following three aspects：

Firstly, from the point of measurement, it will make deviation to the weights of trading partners, and ultimately affect the measurement accuracy of the national effective exchange rate when ignoring the effect of real value added to the actual trade volume under vertical specialization. Simultaneously, countries will compete in each link of production, and a country's final product contains a number of materials or service investment from other countries under vertical specialization. Therefore, the real effective exchange rate also should reflect the real value competition, rather than the competition in final product. In this paper, by constructing accounting system of RMB real effective exchange rate under the framework of input and output, the RMB real effective exchange rate is restated. On this basis, research on industrial upgrading has certain creativity.

Secondly, from the point of research content, traditional studies of industrial upgrading are mostly aimed at the angle of change in industrial structure, and measured by the proportion of each industry in GDP. However, industrial structure upgrading should include rationalization of industrial structure and advancement of industrial structure. These two indicators will help to be more perfect to understand the industrial structure upgrading. At the same time, we should see that, industrial upgrading is increasingly performed as productivity improvement under the background of deepening vertical specialization. Therefore, this article will characterize industrial upgrading from two aspects of the industrial structure upgrading and the improvement of total factor productivity. Thus, we can investigate the impact of RMB exchange rate change on the industrial upgrading more comprehensive.

Thirdly, from the point of research methods, most current researches mainly study the short-term effect and long-term equilibrium relationship of exchange rate changes to industrial structure upgrading through the time series of VAR model, cointegration test, Granger causality test and impulse response in general. But there are few researches on industrial structure upgrading from a more detailed regional level. At the same time, a few research based on the detailed level is done through relatively simple panel data. But in the process of research on this paper, we found that regional industrial structure upgrading in the rationalization of industrial structure has relatively obvious spatial agglomeration. In the view, this article will use more scientific method of spatial econometric to study the influence of RMB exchange rate change on the provincial rationalization of industrial structure.

Keywords:RMB Real Effective Exchange Rate; Value Added; Industrial Upgrading; World Input-Output Tables