Abstract:
By the end of 2007, China’s current account surplus represented 11.1 percent of the
country’s gross domestic product. Many have argued that an appreciation of the RMB
would help to reduce this surplus and restore order to global accounts. Using a panel data
set including China’s exports to 33 countries, I find that a 10 percent RMB appreciation
would reduce ordinary exports by 10 percent and processed exports by 4 percent.
However, given the nature of ordinary exports and processed exports, a generalized
appreciation in East Asia would generate a greater impact on the China’s overall level of
exports. A 10 percent appreciation of all East Asian currencies would reduce ordinary
exports by 10 percent and processed exports by 11 percent. A generalized appreciation in
East Asia would impact both types of exports originating out of China and contribute
more to resolving global imbalances than a bilateral appreciation of the RMB alone.
