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.
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Bibliographic InfoPaper provided by Asian Development Bank Institute in its series ADBI Working Papers with number 219.
Length: 22 pages
Date of creation: 18 Jun 2010
Date of revision:
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global imbalances; exchange rate elasticities; yuan affect prc surplus; surplus processing trade;
Other versions of this item:
- Willem Thorbecke, 2010. "How Would an Appreciation of the Yuan Affect the People's Republic of China's Surplus in Processing Trade?," Working Papers id:2621, eSocialSciences.
- 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-2010-06-26 (All new papers)
- NEP-INT-2010-06-26 (International Trade)
- NEP-SEA-2010-06-26 (South East Asia)
- NEP-TRA-2010-06-26 (Transition Economics)
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