19 June 2010, the People’s Bank of China released a new exchange rate reform, structural reforms aimed at promoting trade and upgrade the industrial structure adjustment. This paper describes integrated from multiple perspectives how the impact of exchange rate changes of industrial structure, and exchange rate changes to upgrade the industrial structure under some suggestions.
First, exchange rates and industrial structure of the relationship.
In general, the exchange rate changes and the relationship between industrial structure has the following transfer: exchange rate changes directly affect the trade structure, and the impact on the trade structure will eventually be reflected in changes in industrial structure came up.
Economic integration in the world today, each country’s economy at large international division of labor in the background, the country’s industrial structure by the effect of changes in the world economy by other countries in the world, the impact of changes in economic structure, trade structure and therefore a certain extent, able to influence the industrial structure.
Second, exchange rate changes on industrial restructuring and upgrading of way.
1. Through foreign trade of industrial upgrading. Structural effects from the trade point of view, non-neutral if the exchange rate, exchange rate changes cause the domestic various trade competitiveness of their products of the following changes. Because of trade, foreign elasticity of demand for different products, when the elasticity of export demand elasticity for the unit, caused by exchange rate movements and export price movements in volatility are equal; when the export elasticity of demand is greater than 1, the exchange rate of its export trade large; when the export demand elasticity is less than 1, the impact of exchange rate changes little. As capital and technology intensive goods elasticity of demand for smaller, when the real exchange rate appreciation due to capital and technology intensive products, changes in foreign demand for smaller, but significantly reduced the demand for foreign labor-intensive.
When the industry entirely by domestic factors of production available, the exchange rate changes on domestic prices did not affect the product, but only act on the international market price of export commodities. When the greater part of the industry factors of production from abroad, the exchange rate changes affect not only the international market price, also on the impact of import prices of production factors.
Therefore, the real exchange rate appreciation will eventually lead to capital-and technology-intensive products relative to labor-intensive exports increased, thus demonstrating the upgrade trade structure.
2. Through the FDI impact of industrial upgrading. Of the United States and other developed countries, multinational companies, they pay more attention to China’s direct investment in market development and possession, its main purpose is to reduce trade costs through the FDI market access or access to the host country, the main considerations include economies of scale, development policies and other factors. While emerging markets in Asia such as Hong Kong and other non-developed countries, their direct investment in China to seek investment opportunities in low-cost, in order to take full advantage of national police assigned different factors of production, dominant establishment of an international industrial chain, and its products sold for export or domestic markets of developed countries. Therefore, exchange rate movements on the impact of FDI in these countries is more significant.
Thus, although the appreciation of the RMB exchange rate of total FDI investment has a negative impact, but will help to improve the investment structure of FDI, to increase investment in capital-intensive industries to reduce investment in labor-intensive industries, thereby encouraging foreign participation in domestic industrial structure adjustment and optimization.
Third, the exchange rate reform on the significance of industrial upgrading.
1. Change the over-reliance on foreign demand, economic growth, and expand domestic demand. From a macroeconomic development, the driving economic growth in the “troika” in the healthy development of domestic demand will be the future of the fundamental driving force of sustainable economic development. Therefore, should take advantage of favorable conditions for exchange rate reform will be the current over-reliance on external demand in China’s economic growth model to gradually adjust domestic demand-led model.
2. Full of flexible exchange rate mechanism to self-allocation of resources is conducive to adjusting the industrial structure. Flexible exchange rate formation mechanism will be the market price by means of the optimization and upgrading of industrial structure and change resources gathered over the situation to the export sector, and promote growth of services and other tertiary industries, and gradually improve China’s industrial and trade structure.
3. Conducive to improving China’s position in the international division of labor, to enable enterprises to enhance the capability of independent innovation and technology upgrading. Over the years, the number of labor-intensive products in China depend on the implementation of export-oriented expansion strategy, most companies are at a low price to win, lack of brand long-term planning.
When the exchange rate adjustment, export prices increased at this stage in China will bring huge shock enterprises, forcing them to accelerate the upgrade, take the difference, branding the path of development, by improving the technological competitiveness to go content type corresponding to the path of development will improve our position in the international division of labor.
Fourth, the policy recommendations.
Through the above analysis, we recognize that and adjust the exchange rate mechanism on the one hand help the Chinese to adapt to globalization, to adapt to China’s sustainable economic growth; the other hand, exchange rate policy by other means, help to now rely on external demand and investment in China’s drive model of economic growth, changes in domestic demand driven by internal growth-oriented, to achieve internal economic balance. Based on the above analysis, the author of the reform of exchange rate policy and the upgrading of industrial structure context of the following views:
1. To maintain exchange-rate appreciation of the initiative and slightly progressive principles. The slow economic restructuring and macroeconomic stability in China determined to maintain the exchange rate should be kept slightly progressive principles. Because the yuan appreciate slightly conducive to maintaining the comparative advantages of trade, elements of domestic resources and help the flow of labor-intensive industries from technology-intensive industries, thus contributing to the advancement of domestic industrial structure and the direction of evolution.
2. To increase efforts to support high-tech export policy. Some of the exchange rate of theory and has been run, the real exchange rate will be on China’s exports have a significant impact, in this case, the Government should adopt preferential policies on the export of high-tech exports support, and actively guide the export of industrial upgrading , promote the export of industrial innovation, increase the technological content and added value and lead to the advancement of domestic industrial structure as a whole.
3. By improving mechanisms to facilitate imports of high-tech high-tech industries. High-tech imports to China high-tech industry has a positive role in the development, and the current high-tech industry in China is still in the elasticity of demand shortage. Therefore, we can use the real exchange rate of RMB exchange rate reform to improve upon the favorable conditions of high-tech products through imports to meet domestic demand; addition of high-tech imports, domestic manufacturers can make by learning advanced science and technology, competition with foreign manufacturers to acquire, improve the technology industry production purposes.
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