A Multilateral Study of China´s Price Competitiveness in Manufacturing

As an important international competitiveness indicator, real effective exchange rates based on unit labor costs can provide a reliable gauge of price competitiveness about the relative profitability of traded goods in manufacturing. This paper uses reliable data of trade and output data in manufacturing of 21 countries from 1989 to 2003, and adopts time-varying weights, which can reflect the rapidly changing trade patterns promptly and are much closer to the real situation in world manufactures trade. This paper analyzes the performance of China unit labor costs and effective exchange rates, besides we estimate the loss in competitiveness due to RMB appreciation. The results provide a new multilateral tool for studying China´s trade competitiveness and the issue of exchange rate.