Real exchange rate and productivity in China

This article investigates the impact that the real exchange rate appreciation in China has exerted on productivity growth since 1994. We remind the arguments explaining a positive or a negative impact of a real appreciation on efficiency and on technical progress. DEA Malmquist indices of productivity growth and of its two components are calculated for twenty-nine Chinese provinces. The econometric estimation shows that the appreciation of the real exchange rate had an unfavourable effect on technical progress but a favourable effect on efficiency growth, and these two effects offset each other partially to give a lesser negative effect on productivity growth.