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

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  • Willem Thorbecke
  • Gordon Smith

Abstract

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.

Suggested Citation

  • Willem Thorbecke & Gordon Smith, 2010. "How Would an Appreciation of the Renminbi and Other East Asian Currencies Affect China's Exports?," Review of International Economics, Wiley Blackwell, vol. 18(1), pages 95-108, February.
  • Handle: RePEc:bla:reviec:v:18:y:2010:i:1:p:95-108
    DOI: 10.1111/j.1467-9396.2008.00799.x
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