Exchange rate appreciation, trade competition and technology transaction: evidence from China

Abstract

PurposeThe purpose of this study is mainly to investigate the stimulating effect on technology transactions of trade competition resultant from RMB appreciation.Design/methodology/approachThis study uses Chinese provincial panel data from 1998 to 2015 and utilizes GMM method to estimate the stimulating effect of RMB appreciation on technical transactions through trade competition.FindingsThe results demonstrate that RMB appreciation can encourage enterprises to make use of domestic technology market resources for innovation. Specifically, the increase in imports due to the appreciation of RMB can generate technology spill-over and significantly promote technology trade. The export competition resultant from RMB appreciation can also encourage domestic and foreign enterprises to enhance export competitiveness through increased technology transactions.Originality/valueThe current research investigates the impact of exchange rate on independent innovation, but this study demonstrates the influence of exchange rate on technology transactions. In addition, the data in this study cover 1998–2015 in China and thus contributes to determining the effects of exchange rate appreciation in emerging countries.