Real exchange rate and manufacturing employment in China

The impacts of the real exchange rate on employment and its channels are investigated. A real appreciation, (1) by switching factors from workers to imported inputs (technological channel), (2) by decreasing exports (export volume channel), (3) by exerting pressure on efficiency improvement (efficiency channel), exerts an effect on employment. Using the panel data of the 29 Chinese provinces for the period 1993-2002, the econometric results show statistically significant negative effects of the real appreciation of the renminbi on manufacturing employment. The three channels are statistically significant, the technological channel being the most important.