China's Trade Surplus, Export Gap and CNY Carry Trade
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| Title | China's Trade Surplus, Export Gap and CNY Carry Trade
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| Author | Zhang Dingsheng Zhao Wenxia |
| Organization | CEMA Central University of Finance and Economics |
| Email | whuzds@163.com，zhwenxia@126.com |
| Key Words | CNY Carry Trade; Export Gap; Trade Surplus |
| Abstract | We show that there exists notable “carry trade” behavior in China's trade surplus from Hong Kong during these years. The surplus and export gap load positively on interest rate of China and negatively on interest rate of America, a position that generated “carry returns” after the appreciation of RENMINBI. The positive China loadings correlate with companies’ holdings of RMB assets, as well as the negative America loadings with companies’ short-term debt exposures. Though the capital account has been restricted in China, the CNY carry trade can be conducted through current account, which is reflected by over-invoicing export. We analyze whether foreign-invested companies tend to conduct carry trade via trade. We also evaluate what kind of industries are subject to carry trade, and estimate their effects on trade surplus using the method of difference in differences. |
| Serial Number | WP919 |
| Time | 2015-08-28 |
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