How Would an Appreciation of the Yuan Affect the People's Republic of China's Surplus in Processing Trade?
AbstractEnormous trade surpluses are problematic for the People’s Republic of China (PRC) and the rest of the world. They primarily stem from processing trade. This paper investigates how exchange rate changes would affect the PRC’s imports for processing and processed exports. The results indicate that an appreciation throughout East Asian supply chain countries would reduce the PRC’s surplus in processing trade, while an appreciation of the yuan alone might not. Even for an appreciation throughout East Asia, however, the sum of the exchange rate elasticities is not large. Thus, to rebalance the PRC’s trade, exchange rate appreciations must be accompanied by other changes such as factor market liberalization and greater enforcement of environmental regulations.[ Working Paper 219]
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Date of creation: Jun 2010
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trade surpluses; People’s Republic of China; exchange rate changes; East Asian; environmental regulations; liberalization;
Other versions of this item:
- Thorbecke, Willem, 2010. "How Would an Appreciation of the Yuan Affect the People's Republic of China's Surplus in Processing Trade?," ADBI Working Papers 219, Asian Development Bank Institute.
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-07-10 (All new papers)
- NEP-IFN-2010-07-10 (International Finance)
- NEP-INT-2010-07-10 (International Trade)
- NEP-TRA-2010-07-10 (Transition Economics)
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