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The People’s Republic of China’s Currency and Product Fragmentation

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  • Yamashita, Nobuaki

    (Asian Development Bank Institute)

Abstract

This paper examines how an appreciation of the currency of the People’s Republic of China (PRC)—renminbi—affects the country’s exports in the context of production fragmentation, using a panel data set of the PRC’s trade for 1992/93–2008/09. It constructs two exchange rates for renminbi: one is a bilateral real exchange rate and the other is a real effective exchange rate against East Asian component suppliers. It is found that appreciation of the renminbi would somewhat offset a reduction in the volume of the PRC’s exports induced by lower importing costs of components. Hence, evidence casts further doubts on the efficacy of further unilateral reform of the renminbi exchange rate regime on correcting trade imbalances.

Suggested Citation

  • Yamashita, Nobuaki, 2011. "The People’s Republic of China’s Currency and Product Fragmentation," ADBI Working Papers 327, Asian Development Bank Institute.
    • Handle: RePEc:ris:adbiwp:0327
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    References listed on IDEAS

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    More about this item

    Keywords

    renminbi; prc exports; production fragmentation; exchange rate regime;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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