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China's Exchange Rate Movements and Corporate Currency Invoicing Strategies

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  • Jingtao Yi

Abstract

Since China introduced a new managed floating exchange rate regime in 2005, the persistent appreciation of the renminbi against the US dollar has led Chinese firms to reassess their choice of invoice currency among the dollar and other international alternatives to price their exports. The present paper performs a systematic invoice currency analysis by surveying the published literature, summarizing criteria for decision‐making, and evaluating the choices available to Chinese exporters implementing currency invoicing strategies to maximize expected profits. This study finds that the euro could play an increasing role as the invoice currency of Chinese firms, although the US dollar will still play a dominant role. Chinese exporters might shift gradually from the dollar to the euro in the face of the falling dollar, balancing between the two by necessity.

Suggested Citation

  • Jingtao Yi, 2009. "China's Exchange Rate Movements and Corporate Currency Invoicing Strategies," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(5), pages 36-51, September.
  • Handle: RePEc:bla:chinae:v:17:y:2009:i:5:p:36-51
    DOI: 10.1111/j.1749-124X.2009.01165.x
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    References listed on IDEAS

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