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A (Lack of) Progress Report on China's Exchange Rate Policies

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  • Morris Goldstein

    (Peterson Institute for International Economics)

Abstract

This working paper assesses the progress made in improving China's exchange rate policies over the past five years (that is, since 2002). I first discuss four indicators of progress on China's external imbalance and its exchange rate policies—namely, the change in (and level of) China's global current account position, movements in the real effective exchange rate of the renminbi (RMB), the role of market forces in the determination of the RMB, and China's compliance with its obligations on exchange rate policy as a member of the International Monetary Fund (IMF). I then discuss why the lack of progress in improving China's exchange rate policies matters for the economies of the China and the United States and for the international monetary and trading system. I also argue that several popular arguments and excuses for why more cannot be accomplished on removing the large undervaluation of the RMB are unpersuasive. Finally, I consider what can and should be done by China, the United States, and the IMF to accelerate progress over the next year or two.

Suggested Citation

  • Morris Goldstein, 2007. "A (Lack of) Progress Report on China's Exchange Rate Policies," Working Paper Series WP07-5, Peterson Institute for International Economics.
    • Handle: RePEc:iie:wpaper:wp07-5
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    Citations

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    Cited by:

    1. Mishkin, Frederic S., 2009. "Globalization and financial development," Journal of Development Economics, Elsevier, vol. 89(2), pages 164-169, July.
    2. Ila Patnaik & Ajay Shah, 2009. "The difficulties of the Chinese and Indian exchange rate regimes," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 6(1), pages 157-173, June.
    3. Cheng, Fuzhi, 2008. "China: Shadow WTO agricultural domestic support notifications," IFPRI discussion papers 793, International Food Policy Research Institute (IFPRI).
    4. Das, Dilip K., 2009. "The evolution of renminbi yuan and the protracted debate on its undervaluation: An integrated review," Journal of Asian Economics, Elsevier, vol. 20(5), pages 570-579, September.
    5. Shaghil Ahmed, 2009. "Are Chinese exports sensitive to changes in the exchange rate?," International Finance Discussion Papers 987, Board of Governors of the Federal Reserve System (U.S.).
    6. Niall Ferguson & Moritz Schularick, 2007. "‘Chimerica’ and the Global Asset Market Boom," International Finance, Wiley Blackwell, vol. 10(3), pages 215-239, December.

    More about this item

    Keywords

    exchange rate; current account adjustment; China; IMF;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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