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N°227 |
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| October 2003 |
| Should the Yuan be
Revalued? |
Agnès Bénassy-Quéré
Amina Lahrèche-Révil
Françoise Lemoine |
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| China's exchange rate policy
is often invoked to explain the widening of the us trade deficit. Nevertheless,
if prices (and hence the exchange rate) do indeed play a role in Chinese competitiveness,
the impact expected from a possible rise in the yuan* should not be over-estimated.
First, China's competitiveness stems mainly from structural factors. Next, China's
share in us trade remains relatively small. However, an appreciation of the yuan
could be followed by an appreciation of all Asian currencies, which would then
obviously have a greater impact on the American trade balance. The present caution
of the Chinese authorities may be explained by fears about an appreciation worsening
the distribution of resources and weakening local industry. Multinational firms
do indeed benefit from very low unit labour costs in China. But local firms could
be handicapped by a rise in the yuan, as they have far lower productivity. |
Abstract |
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Full
text (pdf) |
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| Trade
Linkages and Exchange Rates in Asia: The Role of China, Working Paper n°
03-21, December 2003 |
Reference Working Paper |
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