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Can Renminbi Appreciation Reduce the US Trade Deficit?

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  • Jian Zhang
  • Hung‐Gay Fung
  • Donald Kummer

Abstract

Using a computational general equilibrium model, we analyze the impacts of Chinese real exchange rate appreciation on the trade balance of China and the USA and on various industries of both countries. We use several scenarios with 2.1, 6 and 12 percent real exchange rate appreciations for our simulation analysis. The results indicate that China's exchange rate appreciation might not solve the enlarging US current account deficits. Chinese outputs in both primary and manufacture sectors will increase, whereas the outputs of energy and services sectors will be adversely affected. The price of value‐added products declines in light of the renminbi appreciation. (Edited by Zhinan Zhang)

Suggested Citation

  • Jian Zhang & Hung‐Gay Fung & Donald Kummer, 2006. "Can Renminbi Appreciation Reduce the US Trade Deficit?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 14(1), pages 44-56, February.
    • Handle: RePEc:bla:chinae:v:14:y:2006:i:1:p:44-56
    DOI: 10.1111/j.1749-124X.2006.00008.x
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    References listed on IDEAS

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    1. Francesco Bosello & Jian Zhang, 2005. "Assessing Climate Change Impacts: Agriculture," Working Papers 2005.94, Fondazione Eni Enrico Mattei.
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    Cited by:

    1. Hung‐Gay Fung & Qingfeng Wilson Liu & Erin H. C. Kao, 2007. "China's Outward Direct and Portfolio Investments," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 15(6), pages 53-68, November.
    2. Chee-Heong Quah & Patrick M. Crowley, 2012. "China and the Dollar: An Optimum Currency Area View," Prague Economic Papers, Prague University of Economics and Business, vol. 2012(4), pages 391-411.
    3. repec:prg:jnlpep:v:2013:y:2013:i:4:id:431:p:391-411 is not listed on IDEAS
    4. Hung-Gay Fung & Jian Zhang, 2007. "An Assessment of the Closer Economic Partnership Arrangement Between China and Hong Kong," Chinese Economy, Taylor & Francis Journals, vol. 40(2), pages 36-50, April.

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