China's Exports in a Protectionist World

         
Author Name Willem THORBECKE (Senior Fellow, RIETI) / Nimesh SALIKE (Xi'an Jiaotong-Liverpool University) / CHEN Chen (Xi'an Jiaotong-Liverpool University)
Creation Date/NO. February 2020 20-E-011
Research Project East Asian Production Networks, Trade, Exchange Rates, and Global Imbalances
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Abstract

Tariffs, currency wars, and protectionism pose risks for Chinese firms. In theory, tariffs and exchange rates exert equivalent effects on export volumes. In practice, tariffs deter trade more than appreciations. This paper estimates exchange rate elasticities for China's four-digit export categories, and uses these to infer lower bounds for the impact of tariffs on exports. The results indicate the China's flagship industries such as electronics and machinery are exposed to exchange rate appreciations and tariffs. The paper then considers how China can promote freer trade to mitigate risks and reduce uncertainty.