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Mofication of Chinese Exchange rate policy: Rationale, extent and recent development

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  • Samuel GUERINEAU

    ()
    (Centre d'Etudes et de Recherches sur le Développement International)

  • Michaël GOUJON

    ()
    (Centre d'Etudes et de Recherches sur le Développement International)

Abstract

On July 21, China slightly revalued the Renminbi and officially modified the exchange rate regime. Interpreting this move as only the outcome of international pressures to reduce international trade imbalances is however misleading. To support our argument, we explore the rationale of the July 21 decision in the history of exchange rate management in China, and through the review of the twin debates of exchange rate level / regime. We argue that both external and internal concerns are took into account by Chine authorities in the exchange rate management. Moreover, the entire responsibility of Chinese exchange rate management in the world trade imbalances is doubtful. The review of the recent development since the July 21 shows that the impact of July 21 decision is limited. While the hot money inflows seems to have been tamed, the previous economic trends have not been modified to date.

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File URL: http://publi.cerdi.org/ed/2005/2005.23.pdf
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Bibliographic Info

Paper provided by CERDI in its series Working Papers with number 200523.

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Length: 25
Date of creation: 2005
Date of revision:
Handle: RePEc:cdi:wpaper:739

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Keywords: China; exchange rate policy; Trade imbalances;

References

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  1. Tung, Chen-Yuan & Baker, Sam, 2004. "RMB revaluation will serve China's self-interest," China Economic Review, Elsevier, vol. 15(3), pages 331-335.
  2. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The revived Bretton Woods system," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(4), pages 307-313.
  3. Agnès Bénassy-Quéré & Amina Lahrèche-Revil, 2003. "Trade Linkages and Exchange Rates in Asia: The Role of China," Working Papers 2003-21, CEPII research center.
  4. John Williamson, 2005. "A Currency Basket for East Asia, Not Just China," Policy Briefs PB05-01, Peterson Institute for International Economics.
  5. Michael Dooley & David Folkerts-Landau & Peter Garber, 2005. "An essay on the revived Bretton Woods system," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
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