{
  "title": "The External Impact of China'S Exchange Rate Policy: Evidence From Firm Level Data",
  "publication": "IMF Working Papers, July 1, 2011",
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  "summary": "We examine the impact of renminbi revaluation on foreign firm valuations, considering two surprise announcements of changes in China’s exchange rate policy in 2005 and 2010 and employing data on some 6,000 firms in 44 economies. Stock returns rise with renminbi revaluation expectations.",
  "sections": [
    {
      "heading": "Research question and data",
      "content": "- Research focus: impact of renminbi revaluation on foreign firm valuations.\n- Events analyzed: two surprise announcements of changes in China’s exchange rate policy in 2005 and 2010.\n- Sample: data on some 6,000 firms in 44 economies.\n- Additional tests: ten instances of market-perceived changes in prospective Chinese currency policy."
    },
    {
      "heading": "Main empirical findings",
      "content": "- Stock returns rise with renminbi revaluation expectations.\n- Expected renminbi appreciation:\n  - has a positive effect on firms exporting to China.\n  - has a negative impact on firms providing inputs for China’s processing exports.\n  - leads to stock price increases for firms competing with China in their home market.\n  - leads to stock price decreases for firms importing Chinese products with large imported-input content.\n- There is some evidence that expected renminbi appreciation reduces the valuation of financially-constrained firms, presumably because appreciation implies reduced Chinese purchases of foreign securities.\n- Key repetition: results carry over when considering ten instances of market-perceived changes in prospective Chinese currency policy."
    },
    {
      "heading": "Interpretation and mechanisms",
      "content": "- Findings reflect a combination of:\n  - improvements in general market sentiment following renminbi revaluation expectations; and\n  - specific trade effects stemming from changes in relative prices and trade flows.\n- Financial channel: expected appreciation may reduce demand for foreign securities from Chinese investors, adversely affecting financially-constrained firms."
    },
    {
      "heading": "Subjects and keywords (topical scope)",
      "content": "- Subjects: Currencies, Exchange rates, Exports, Financial institutions, Foreign exchange, Imports, International trade, Money, Stocks.\n- Keywords: China; China's processing; Currencies; exchange rate; Exchange rates; Exports; exports to China; external impact; firm; Global; Imports; imports from China; market beta; processing export; renminbi appreciation; stock market; Stocks; WP.\n\n---\n\n Content in this bundle\n\n- Wp11155\n  - Wp11155 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Wp11155 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-external-impact-of-china-s-exchange-rate-policy-evidence-from-firm-level-data-25016"
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    "Authors: Barry J. Eichengreen, Hui Tong",
    "Published: July 1, 2011",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781455290680.001",
    "Research focus: impact of renminbi revaluation on foreign firm valuations.",
    "Events analyzed: two surprise announcements of changes in China’s exchange rate policy in 2005 and 2010.",
    "Sample: data on some 6,000 firms in 44 economies.",
    "Additional tests: ten instances of market-perceived changes in prospective Chinese currency policy.",
    "Stock returns rise with renminbi revaluation expectations.",
    "Expected renminbi appreciation:",
    "There is some evidence that expected renminbi appreciation reduces the valuation of financially-constrained firms, presumably because appreciation implies reduced Chinese purchases of foreign securities.",
    "Key repetition: results carry over when considering ten instances of market-perceived changes in prospective Chinese currency policy.",
    "Findings reflect a combination of:",
    "Financial channel: expected appreciation may reduce demand for foreign securities from Chinese investors, adversely affecting financially-constrained firms.",
    "Subjects: Currencies, Exchange rates, Exports, Financial institutions, Foreign exchange, Imports, International trade, Money, Stocks.",
    "Keywords: China; China's processing; Currencies; exchange rate; Exchange rates; Exports; exports to China; external impact; firm; Global; Imports; imports from China; market beta; processing export; renminbi appreciation; stock market; Stocks; WP.",
    "**Wp11155**"
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