Rebalancing Trade within East Asian Supply Chains
China runs surpluses of $400 billion-$500 billion in processing trade. In value-added terms, East Asia as a whole runs surpluses in processing trade with the West. This generates appreciation pressures on exchange rates throughout the region. Using data up to 2012, this paper reports that a concerted appreciation would rebalance trade. An appreciation in China accompanied by depreciations in other surplus economies such as Taiwan and South Korea would not reduce China's surplus in processing trade but would increase its deficit in ordinary (labor-intensive) trade. To rebalance, East Asia as a whole needs to give market forces greater play in determining exchange rates, and international organizations need to conduct surveillance on regional production networks.
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- Yuqing Xing, 2011.
"Processing Trade, Exchange Rates and China’s bilateral Trade Balances,"
GRIPS Discussion Papers
10-30, National Graduate Institute for Policy Studies.
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"The effect of exchange rate volatility on international trade in East Asia,"
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Elsevier, vol. 23(4), pages 395-406, December.
- Kazunobu HAYAKAWA & Fukunari KIMURA, 2008. "The Effect of Exchange Rate Volatility on International Trade in East Asia," Working Papers d003, Economic Research Institute for ASEAN and East Asia (ERIA).
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- Robert C. Feenstra & Shang-Jin Wei, 2010. "China's Growing Role in World Trade," NBER Books, National Bureau of Economic Research, Inc, number feen07-1, October.
- Sarah Y. Tong & Yi Zheng, 2008. "China's Trade Acceleration and the Deepening of an East Asian Regional Production Network," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 16(1), pages 66-81.
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