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The Macroeconomic Impacts Of Chinese Currency Appreciation On China And The Rest Of The World: A Global Computable General Equilibrium Analysis

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  • Yang, Jun
  • Zhang, Wei
  • Tokgoz, Simla

Abstract

There has been contentious debate surrounding the issue of undervaluation of the Chinese Renminbi, with continuous international political pressure on China to appreciate its currency and the Chinese government resisting significant changes in its policy. A key question underlining the debate is whether a Renminbi appreciation would deliver substantial gains for exports and employment as the United States has argued or a significant slowdown of Chinese economy as feared by the Chinese government, and if so to what extent. This paper analyzes the ex-ante, short-term impacts of the Chinese Renminbi appreciation on the Chinese and world economies using the novel approach of modeling nominal exchange rate adjustment in the Global Trade Analysis Project, a global computable general equilibrium model. Scenario results show that the Chinese economy will be affected negatively, with lower real gross domestic product, lower employment rates, and a decline in the trade surplus. Chinese currency appreciation has a positive impact on the GDP of the major countries and regions, but by a small margin. With a higher Chinese exchange rate, trade balances for other trading partner countries, with the exception of the United States, improve.

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Bibliographic Info

Paper provided by International Association of Agricultural Economists in its series 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil with number 125010.

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Date of creation: 07 Jun 2012
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Handle: RePEc:ags:iaae12:125010

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Keywords: China; computable general equilibrium model; economic impacts; exchange rate; Renminbi appreciation; Financial Economics; International Relations/Trade;

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  1. van Tongeren, Frank W. & Huang, Jikun, 2004. "China'S Food Economy In The Early 21st Century; Development Of China'S Food Economy And Its Impact On Global Trade And On The Eu," Report Series 29093, Agricultural Economics Research Institute.
  2. Willenbockel, Dirk, 2006. "Structural Effects of a Real Exchange Rate Revaluation in China: A CGE Assessment," MPRA Paper 920, University Library of Munich, Germany.
  3. Zhang, Jian & Fung, Hung-Gay, 2006. "Winners and losers: Assessing the impact of Chinese Yuan appreciation," Journal of Policy Modeling, Elsevier, vol. 28(9), pages 995-1009, December.
  4. Meijl, Hans van & Tongeren, Frank van, 2004. "International diffusion of gains from biotechnology and the European Union's Common Agricultural Policy," Agricultural Economics, Blackwell, vol. 31(2-3), pages 307-316, December.
  5. Virginie Coudert & C├ęcile Couharde, 2005. "Real Equilibrium Exchange Rate in China," Working Papers 2005-01, CEPII research center.
  6. Marcus Noland & Sherman Robinson & Zhi Wang, 1999. "The Continuing Asian Financial Crisis: Global Adjustment and Trade," Working Paper Series WP99-4, Peterson Institute for International Economics.
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