IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

The Undervaluation of the Yuan Dispute: Is a Repetition of Germany's Experience in 1969 Necessary, Inevitable or Desirable? A Comment and Reply to John A. Tatom

Listed author(s):
  • Oberpriller Christian M.


    (Bundeswehr University Munich)

  • Sauer Beate


    (Bundeswehr University Munich)

  • Sell Friedrich L.


    (Bundeswehr University Munich)

The present article is a reply to the article by John A. Tatom titled ``The US-China Currency Dispute: Is a Rise in the Yuan Necessary, Inevitable or Desirable?," recently published in this journal. We found that John Tatom seems to only give a partial description of the US-Chinese economic relations, of the main features of the Chinese economy, and also of the macroeconomic policy options available to China. We argue that the real exchange rate is not the appropriate measure for a currency undervaluation, but it is the continuous, one-directional and accelerating accumulation of foreign exchange reserves. We also argue that the likely improvement in the US trade balance deficit caused by an appreciating Yuan will not be offset by growing US trade balance deficits with other East Asian countries. Furthermore, giving up the actual currency peg will benefit rather than harm China, provided that the steps towards Yuan flexibility will be taken in the right sequence and order. We hold that a revaluation of the Yuan is necessary, inevitable and desirable just as much as it happened to be with the Deutschmark in 1969. It would not ``damage Chinese development." China needs a Yuan appreciation mainly in its own interest to assure domestic financial market stability, and to avoid an overheating of its economy and a soaring inflation.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by De Gruyter in its journal Global Economy Journal.

Volume (Year): 8 (2008)
Issue (Month): 2 (June)
Pages: 1-15

in new window

Handle: RePEc:bpj:glecon:v:8:y:2008:i:2:n:7
Contact details of provider: Web page:

Order Information: Web:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

in new window

  1. John A. Tatom, 2007. "China Currency Dispute: Is a Rise in the Yuan Necessary, Inevitable or Desirable?," NFI Working Papers 2007-WP-24, Indiana State University, Scott College of Business, Networks Financial Institute.
  2. Friedrich L. Sell, 2001. "Contagion in Financial Markets," Books, Edward Elgar Publishing, number 2277.
  3. Friedrich L. Sell, 2007. "Anticipated effects of foreign currency reserve diversification in Asian countries: Do China and India matter for coordination?," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 8(1), pages 32-38, 04.
  4. Tatom John A, 2007. "The US-China Currency Dispute: Is a Rise in the Yuan Necessary, Inevitable or Desirable?," Global Economy Journal, De Gruyter, vol. 7(3), pages 1-15, October.
  5. Tatom, John, 2007. "China currency dispute: is a rise in the yuan inevitable, necessary or desirable?," MPRA Paper 5366, University Library of Munich, Germany.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bpj:glecon:v:8:y:2008:i:2:n:7. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.