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De-pegging of the Chinese renminbi against the US dollar: analysis of its effects on China's international trade competitiveness

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  • M. Nair
  • Jothee Sinnakkannu

Abstract

We studied the over- or undervaluation of RMB against the USD, JPY and EUR using the relative purchasing power parity method. We found that the RMB is undervalued in its real terms against the USD by 20.6% and against the EUR by 15.5% between July 2005 and June 2009. We used the export growth and the world exports share methods to determine China's international trade competitiveness during the similar period of time. We found that the de-pegging of RMB has not altered China's international trade competitiveness. We imply the findings that China has been protective by involving in large-scale one-direction intervention in the foreign exchange market, which is in contrast to Article IV of the International Monetary Fund.

Suggested Citation

  • M. Nair & Jothee Sinnakkannu, 2010. "De-pegging of the Chinese renminbi against the US dollar: analysis of its effects on China's international trade competitiveness," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 15(4), pages 470-489.
    • Handle: RePEc:taf:rjapxx:v:15:y:2010:i:4:p:470-489
    DOI: 10.1080/13547860.2010.516169
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    References listed on IDEAS

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    1. Eswar Prasad & Shang-Jin Wei, 2007. "The Chinese Approach to Capital Inflows: Patterns and Possible Explanations," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, pages 421-480, National Bureau of Economic Research, Inc.
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    3. Virginie Coudert & Cécile Couharde, 2005. "Real Equilibrium Exchange Rate in China," Working Papers 2005-01, CEPII research center.
    4. Frankel, Jeffrey, 2004. "On the Renminbi: The Choice between Adjustment under a Fixed Exchange Rate and Adustment under a Flexible Rate," Working Paper Series rwp04-037, Harvard University, John F. Kennedy School of Government.
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    Cited by:

    1. Jarko Fidrmuc & Martin Siddiqui, 2015. "Exchange Rate Policy in China after the Financial Crisis: Evidence from Time-varying Exchange Rate Basket," Review of Development Economics, Wiley Blackwell, vol. 19(3), pages 608-623, August.
    2. Ho, Kin-Yip & Shi, Yanlin & Zhang, Zhaoyong, 2018. "Public information arrival, price discovery and dynamic correlations in the Chinese renminbi markets," The North American Journal of Economics and Finance, Elsevier, vol. 46(C), pages 168-186.

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