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Is the renminbi undervalued?

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  • Jan Lemmen

Abstract

A debate has raged whether and to what extent the renminbi has been undervalued. To answer this question this memorandum is first interested in the level of China’s “equilibrium” (real effective) exchange rate. Secondly, this memorandum is interested in the methodology to determine the equilibrium exchange rate.A survey of the literature concludes toward a renminbi undervaluation of about 25% in real effective terms. This undervaluation is not expected to disappear any time soon.

Suggested Citation

  • Jan Lemmen, 2006. "Is the renminbi undervalued?," CPB Memorandum 166, CPB Netherlands Bureau for Economic Policy Analysis.
    • Handle: RePEc:cpb:memodm:166
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    References listed on IDEAS

    as
    1. Maurice Obstfeld & Kenneth Rogoff, 2007. "The Unsustainable US Current Account Position Revisited," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 339-376, National Bureau of Economic Research, Inc.
    2. Maurice Obstfeld & Kenneth S. Rogoff, 2000. "Perspectives on OECD economic integration : implications for U.S. current account adjustment," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 169-208.
    3. Wim Suyker & Henri de Groot, 2006. "China and the Dutch economy," CPB Document 127, CPB Netherlands Bureau for Economic Policy Analysis.
    4. Brad Setser, 2006. "The Chinese Conundrum: External Financial Strength, Domestic Financial Weakness," CESifo Economic Studies, CESifo Group, vol. 52(2), pages 364-395, June.
    5. Mr. Eswar S Prasad, 2004. "China's Growth and Integration into the World Economy: Prospects and Challenges," IMF Occasional Papers 2004/006, International Monetary Fund.
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    More about this item

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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