Can the chinese trade surplus be reduced through exchange rate policy?

Arbeitspapier

This paper shows empirically that China's trade balance is sensitive to fluctuations in the real effective exchange rate of the renminbi, although the size of the surplus is such that exchange rate policy alone will be unable to address the imbalance. One of the main reasons why the reduction in the trade surplus is limited is that Chinese imports are reduced with a real appreciation of the renminbi.By estimating bilateral import equations, we find that it is imports from other Southeast Asian countries which fall.This result reflects the vertical integration of Southeast Asia with China through the 'Asian production network'.We find, in turn, that imports from Germany - which serve China's domestic demand - behave as one would expect, ie they increase with renminbi real appreciation.All in all, our results raise concerns on the impact of renminbi appreciation on Southeast Asia even if regional currencies do not follow the renminbi's upward trajectory.

Object Details

• ISBN: 978-952-462-860-0
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: BOFIT Discussion Papers ; No. 6/2007

Classification and Topics

• Classification: Wirtschaft ; Empirical Studies of Trade
• Subject: China ; trade ; exports ; real exchange rate

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Garcia-Herrero, Alicia ; Koivu, Tuuli
• Event: Veröffentlichung
• (who): Bank of Finland, Institute for Economies in Transition (BOFIT)
• (where): Helsinki
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/212597
• Last update: 10.03.2025, 11:41 AM CET