Abstract:This paper studies RMB’s misalignment and dynamic appreciation and their influence on China’s three industries, and also probes into the way how macroeconomic policies can form positive interactions with RMB’s current appreciation. Firstly, this paper performs multivariable regression incorporating five independent variables as representatives of China’s economic fundamentals in order to obtain the real equilibrium exchange rate, and then uses Williamson’s approach to calculate RMIB’s misalignment, which is incorporated as the macroeconomic variable in AR time series models for the per capita growth rate of the three industries. The empirical findings are that the overestimation of RMB real equilibrium rate and its appreciation affects the first and the second industry negatively, and affects the third industry positively, but to a much less degree. Based on the results, this paper finally discusses the way macroeconomic policies can interact positively with RMB’s current appreciation from the perspective of Swan model and global value chain, reaching the conclusion that fiscal policies should in the short term aid consumption and in the long term invest heavily in R&D and incentivize innovation.

Keywords: RMB misalignment    RMB appreciation    China economic structure