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Is a Change in the Renminbi Exchange Rate in China's Interest?

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  • Barry Eichengreen

    (University of California, 549 Evans Hall, no. 3880, Berkeley, CA 94720-3880, USA)

Abstract

This paper reviews the controversy over China's exchange rate regime. Placing the issue in the context of the literature on exit strategies, it argues that the best time for China to exit from its peg is now while capital is flowing in and there is a tendency for the rate to appreciate. In contrast, waiting to exit until sentiment has turned around would be problematic. In addition, moving now to a managed float would help the Chinese authorities to gain better control of domestic credit conditions. The principal objections to this recommendation (viz., the banking system is weak, many state enterprises are loss making, and the capital account is not sufficiently open) are unconvincing. Finally, the impact on other countries is likely to be more complex and varied than suggested by other analyses.

Suggested Citation

  • Barry Eichengreen, 2005. "Is a Change in the Renminbi Exchange Rate in China's Interest?," Asian Economic Papers, MIT Press, vol. 4(1), pages 40-75, Winter.
    • Handle: RePEc:tpr:asiaec:v:4:y:2005:i:1:p:40-75
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    Citations

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    Cited by:

    1. Maurice Obstfeld, 2007. "The Renminbi's Dollar Peg at the Crossroads," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 25(S1), pages 29-56, December.
    2. Guonan Ma & Robert N. McCauley, 2007. "Do China's capital controls still bind? Implications for monetary autonomy and capital liberalisation," BIS Working Papers 233, Bank for International Settlements.
    3. Yin-Wong Cheung & Menzie D. Chinn & Eiji Fujii, 2009. "The Illusion of Precision and the Role of the Renminbi in Regional Integration," Chapters, in: Koichi Hamada & Beate Reszat & Ulrich Volz (ed.), Towards Monetary and Financial Integration in East Asia, chapter 13, Edward Elgar Publishing.
    4. Dai, Meixing, 2011. "Motivations and strategies for a real revaluation of the Yuan," MPRA Paper 30440, University Library of Munich, Germany.
    5. Meixing Dai, 2013. "In search of an optimal strategy for yuan’s real revaluation," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 11(1), pages 29-46, February.
    6. Forssbaeck, Jens & Oxelheim, Lars, 2007. "The transition to market-based monetary policy: What can China learn from the European experience?," Journal of Asian Economics, Elsevier, vol. 18(2), pages 257-283, April.
    7. Shaghil Ahmed, 2009. "Are Chinese exports sensitive to changes in the exchange rate?," International Finance Discussion Papers 987, Board of Governors of the Federal Reserve System (U.S.).

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