Wage, Exchange Rate and Trade Surplus

Currently, the issue of rebalance of global economy has attracted wide attention around the world, and I would like to share with you my views on three related issues of China's foreign trade surplus, appreciation of the RMB, and reform of the international financial system which only serve as reference.

I How to Understand the Issue of China's Foreign Trade Surplus

Since China adopted the policies of reform and opening-up more than 30 years ago, China has made great contributions to the development of developed countries' economy by expanding foreign trade. American consumers, in particular, reduced the cost of living and improved their living quality as well as restrained the inflation in the US by purchasing cheap Chinese commodities. Meanwhile, China's foreign exchange reserves were used to purchase American Treasury Securities, balanced the fiscal revenue and expenditure of the US so that the US could keep low interest rate for a long time, promoted the employment and enhanced economic growth in the US.

Since China's entry into WTO, China's foreign trade volume has been enlarged, providing profit growth driver for multinational corporations. Above 70% of China's export products were provided by foreign-invested enterprises or Chinese-foreign joint ventures, among which, some were dealing with processing trade, some were sole foreign-funded enterprises set up by multinational corporations in China. Here is typical case. Iphone made in China was sold at about RMB 3000-4000,with 70% of the profits taken by Apple Inc which owns the intellectual property,25% taken by foreign enterprises which deal with processing trade, leaving only around 5% to Chinese workers and Chinese government. Quite a number of multinational companies ran a deficit in regions outside China, and developed well only in China, where they obtained a profit even surpassing the total profit they obtained in regions outside China. Besides, Chinese economic development led to a significant quantity of import of energy and raw materials, providing the market and development opportunities for countries having such resources. The next step we should take is continuously getting the best out of China's role as the world's economic engine to drive the recovery of the global economy.

Pandect Exploration of Rebalance of China's Economy
I Current Sino-American Trade Imbalance and Analysis of its Underlying Reasons
II Arguments over RMB Exchange Rate
III Three Paths for the Appreciation of the Real Exchange Rate of RMB
IV Methodology and Structure

Chapter I The First Path of Rebalancing China's Economy: Raising Laborers' Wage
I Current Situation and Development Trend of Laborers' Wage in China
II Theoretical Basis for Establishment of Reasonable Wage Growth Mechanism
III International Experience in Terms of Wage Growth
IV Proper Measures for Establishment of Reasonable Wage Growth Mechanism

Chapter II The Second Path of Rebalancing China's Economy: Raising the RMB Exchange Rate
I Equilibrium Exchange Rate Model by Peterson Institute for International Economics
II Exchange Rates Should be a Comprehensive Embodiment of the Level of Economic Development of One Country
III The International Experience and Lessons from the Appreciation of the Exchange Rate
IV Reform of RMB Exchange Rate Formation Mechanism and Policy Recommendations

Chapter III Comparison of Three Paths to Rebalancing China's Economy
I Effect of "ExchangeRate Revaluation" Path
II Effect of "Increase of Wage" Path
III The Third Path of Rebalancing China's Economy: "Gradual Increase of Wage + Gradual Appreciation of RBM Exchange Rate"
IV The Six Hedging Measures China Government Should Adopt to Rebalance its Economy

Chapter IV The First Hedging Measure to Rebalance China's Economy: Accelerating the Pace of Independent Innovation
I Independent Innovation is the Strategic Core of China's National Development in the New Period
II Independent Innovation is the Key to Avoid the"Middle Income Trap" 
III Establish and Perfect Systems and Mechanisms Conducive to Independent Innovation

Chapter V The Second Hedging Measure to Rebalance China's Economy: Accelerating the Transformation of Processing Trade Mode
I The Development Trend of China's Processing Trade Industry
II Realistic Challenges Faced by China's Processing Trade
III Countermeasures for Transformation and Upgrading of China's Processing Trade

Chapter VI The Third Hedging Measure to Rebalance China's Economy: Accelerating the Transformation of Labor-intensive Mode
I Problems of China's Labor-intensive Industries 
II The Necessity of Continuing the Advantages of Labor-intensive Industries
III Countermeasures for Realizing the Transformation of Labor-intensive Mode

Chapter VII The Fourth Hedging Measure to Rebalance China's Economy: Accelerating the Transformation from Resource-intensive Mode
The Necessity to Accelerate the Transformation from Resource-intensive Mode
II Case Study for the Transformation of Resource-intensive Mode
III How does China Transform its Resource-intensive Mode

Chapter VIII The Fifth Hedging Measure to Rebalance China's Economy: Marketization of Production Factor Price
I Harmful Effects of Distorted Production Factor Price and Inevitability of Reform
II Expedite Market Reform of InterestRate and its Countermeasures

Chapter IX The Sixth Hedging Measure to Rebalance China's Economy: Accelerating the RMB Internationalization
I Historic Opportunity for RMB Internationalization
II Acceleration of Route Selection for RMB Internationalization
III To Optimize Associated Conditions of RMB Internationalization
IV To Accelerate Construction of Shanghai International Financial Center