Since the recent economic crisis, the undervaluation of China＇s exchange rate has been a focus in the debate on the global policy mix. Using a non-competitive input-output table, we establish a comparative-static general equilibrium model to simulate the impact of real exchange rate changes on Sino-US trade and labor markets. The simulation shows that the impacts of a lO-percent RMB revaluation on the trade surplus of China and the labor market of the USA are more modest than is generally perceived, and the negative impact on the output of the non-processing industry in China is more significant than that on the processing industry. The Sino--US trade imbalance will continue to deteriorate, China ＇s non-processing trade surplus will decline and the processing trade will increase, with the combined effect being small. For the USA, labor-intensive goods imported from China will shift to different Asian countries instead of transferring back to the US market. The simulation results indicate that the impacts of an RMB revaluation on both Chinese and US labor markets would be limited.
Since 2001, the exports of foreign-invested enterprises （FIEs） have accounted for more than 50percent of China＇s total exports. As foreign capital occupies a high proportion of the total capital of FIEs, most FIEs ＇ capital gains are foreign factor income. Although these gains are calculated as apart of China＇s GDP, they do not belong to China＇s national income. To determine the real contribution of exports to China ＂s welfare, the present paper analyses the impact of exports on China ＂s national income using a non-competitive input output model capturing processing trade. The results show that every US$1000 of China＇s exports generates US$506.8 of national income. The real contribution of exports to China ＂s welfare is much smaller than what we expected. This suggests that China should endeavor to improve the gains from international markets orfind another engine to maintain its economic growth.
