How Would an Appreciation of the Yuan Affect the People's Republic of China’s Surplus in Processing Trade?
22 Pages Posted: 12 Jul 2010
Date Written: June 18, 2010
Abstract
Enormous trade surpluses are problematic for the People’s Republic of China (PRC) and the rest of the world. They primarily stem from processing trade. This paper investigates how exchange rate changes would affect the PRC’s imports for processing and processed exports. The results indicate that an appreciation throughout East Asian supply chain countries would reduce the PRC’s surplus in processing trade, while an appreciation of the yuan alone might not. Even for an appreciation throughout East Asia, however, the sum of the exchange rate elasticities is not large. Thus, to rebalance the PRC’s trade, exchange rate appreciations must be accompanied by other changes such as factor market liberalization and greater enforcement of environmental regulations.
Keywords: Global imbalances, exchange rate elasticities, People’s Republic of China
JEL Classification: F32, F41
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Chinese Approach to Capital Inflows: Patterns and Possible Explanations
By Eswar S. Prasad and Shang-jin Wei
-
The Chinese Approach to Capital Inflows: Patterns and Possible Explanations
By Eswar S. Prasad and Shang-jin Wei
-
By Eswar S. Prasad, Thomas Rumbaugh, ...
-
The Impact of Tax Morale and Institutional Quality on the Shadow Economy
By Benno Torgler and Friedrich Schneider
-
The Overvaluation of Renminbi Undervaluation
By Yin-wong Cheung, Menzie David Chinn, ...
-
The Overvaluation of Renminbi Undervaluation
By Yin-wong Cheung, Menzie David Chinn, ...
-
Assessing China's Exchange Rate Regime
By Jeffrey A. Frankel and Shang-jin Wei