Title: How exchange rate affects Chinese processing trade? The case of ground fish

Authors: Dengjun Zhang; Jinghua Xie; Øystein Myrland

Addresses: Business School, University of Stavanger, N-4030, Stavanger, Norway ' School of Business and Economics, The Arctic University of Norway/UiT, Tromsø, Norway ' School of Business and Economics, The Arctic University of Norway/UiT, Tromsø, Norway

Abstract: As imports destined for primary processing and then exporting occur across industries, in this study we developed a structural model to examine how exchange rate affects the exports of processed ground fish from China. The home demand for processed goods is incorporated into the model in accordance with the fact that the share of processed goods remaining in China tends to increase over time. China is the world's largest import-processing centre of ground fish. The fact that China produces almost no ground fish facilitates identifying the trade data. For exports with both foreign and domestic origins, the data issue is a big challenge for empirical studies. The simulated results indicate that a 7% appreciation of the Chinese currency would raise the export price of processed ground fish by 4.06%, corresponding to a share of 40% foreign content in the processed product. In addition, the increased share of home consumption would enlarge the responses of exports to changes in the exchange rate.

Keywords: exchange rage; trade; China; ground fish; processing.

DOI: 10.1504/IJARGE.2017.086999

International Journal of Agricultural Resources, Governance and Ecology, 2017 Vol.13 No.3, pp.256 - 271

Received: 24 Dec 2016
Accepted: 19 Jul 2017
Published online: 03 Oct 2017 *

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