The Effects of Chines Yuan Variation on China’s Competitiveness

BECHIR Sabiha, LACHI Oualid

Abstract

This paper examines how the exchange rate affects the economic competitiveness of China in the short and long term. First, we study and the analysis of the link between the exchange rate and the various competitiveness indicators in economic theory, which indicates that a depreciation of the exchange rate causes a real improvement in terms of long-term competitiveness, but this impact negatively affects its level in the short term. Then, in the second part, through an econometric study of data from the period 1990-2016 in the case of China, uses the ARDL dynamic model, it shows that there is a short and long relationship term between the variables of the study, it also demonstrates that the depreciation of the exchange rate is beneficial in the case of China, where it has a positive effect on competitiveness. Also the error correction coefficients recorded in China indicate that short-term imbalances can be corrected and return to the long-run equilibrium situation, in other words,  when the competitiveness indicator is far from its equilibrium In the short term, it can be corrected at different levels, until it is up to the long-term equilibrium.