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How Would an Appreciation of the Renminbi and Other East Asian Currencies Affect China's Exports?

  • Willem Thorbecke
  • Gordon Smith

China's global current account surplus equaled 9% of Chinese GDP in 2006 and 11% of GDP in 2007. Many argue that a renminbi appreciation would help to rebalance China's trade. Using a panel dataset including China's exports to 33 countries we find that a 10% renminbi (RMB) appreciation would reduce ordinary exports by 12% and processed exports by less than 4%. A 10% appreciation of all other East Asian currencies would reduce processed exports by 6%. A 10% appreciation throughout the region would reduce processed exports by 10%. Since ordinary exports tend to be simple, labor-intensive goods while processed exports are sophisticated, capital-intensive goods, a generalized appreciation in East Asia would generate more expenditure-switching towards US and European goods and contribute more to resolving global imbalances than an appreciation of the RMB or of other Asian currencies alone. Copyright � 2010 Blackwell Publishing Ltd.

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Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 18 (2010)
Issue (Month): 1 (02)
Pages: 95-108

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Handle: RePEc:bla:reviec:v:18:y:2010:i:1:p:95-108
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