![]() Nominal Exchange Rate (RMB/USD) - annual average Figure 1 shows the evolution of the nominal exchange rate (RMB/USD) over the period between 19. In recent years, the Chinese exchange policy has undergone several transformations. Fourth section analyzes the effects of an RMB appreciation on foreign trade with the European Union, and finally, the fifth section concludes the work. In third section, we analyze China’s integration into world trade. In second section a characterization of the Chinese exchange policy is provided. The present work has as its main objective, to give an answer to a set of issues relating to the impact of the Chinese exchange policy on foreign trade with the European Union.Īpart from the introduction, the work is structured in five sections. In the specific case of the European Union (EU), on one side, Chinese exports, with increasingly technological content, compete directly with the goods in which the EU has a comparative advantage, and on the other side, several European governments and political leaders argue about the need for greater cooperation between the EU and China, as a precondition for a better balance in the International Monetary System’s functioning. In these circumstances, the issue of undervaluation of the Chinese currency has been the subject of numerous controversies in many countries, in particular with regard to how it reflects upon international trade. Although the amount of RMB undervaluation is not unanimous, it is certain that this misalignment of the exchange rate results in a distortion of the economic fundamentals, exerting an adverse effect on the economic structure and on the macroeconomic performance of the world economy. This option of the Chinese authorities for maintaining the currency’s value below its equilibrium value has been a growing concern within the international community. But, while Chinese competitiveness is not just a matter of currency undervaluation and low labor costs, it is a fact that this policy represents a huge stimulus to the growth of its exports, by making them cheaper than they would be if the exchange rate were flexible and Chinese currency appreciated. See, for example, Shi (2006), Cline (2010) and Cline and Williamson (2011). , as being the responsible factor for this increase 4 4 See, for example, Cline and Williamson (2011). In other words, the exchange rate misalignment measures how much the exchange rate deviates from the long-term equilibrium rate. In general, the exchange rate misalignment is defined as the difference between the observed Real Exchange Rate (RER) and estimated RER. In this sense, there are many authors who point out the low value (undervaluation) of the Yuan/Renminbi (RMB) exchange rate, relative to its equilibrium value 3 3Ī situation usually known in economic literature as exchange rate misalignment. This growth of the Chinese economy is mainly the result of an increase in exports. Likewise, the extraordinary increase in the competitiveness of Chinese enterprises and the high revenues from foreign investment have given way to numerous debates all over the world, in particular on the issue of the “opportunity or threat” raised by the economic upswing of China 2 2 See, for example, Martins (2005), Rodrik (2006) and Assche et al. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.In recent years, the Chinese economy has been characterized by a strong and rapid growth, a fact that has caught the attention of many authors 1 1 compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. We may also receive compensation if you click on certain links posted on our site. We may receive compensation from our partners for placement of their products or services. While we are independent, the offers that appear on this site are from companies from which receives compensation. is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions.
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