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Plasschaert, Sylvain --- "Is the Renminbi Undervalued?" [2012] ELECD 916; in Wouters, Jan; de Wilde, Tanguy; Defraigne, Pierre; Defraigne, Jean-Christophe (eds), "China, the European Union and Global Governance" (Edward Elgar Publishing, 2012)

Book Title: China, the European Union and Global Governance

Editor(s): Wouters, Jan; de Wilde, Tanguy; Defraigne, Pierre; Defraigne, Jean-Christophe

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781781004265

Section: Chapter 9

Section Title: Is the Renminbi Undervalued?

Author(s): Plasschaert, Sylvain

Number of pages: 19

Extract:

9. Is the renminbi undervalued?
Sylvain Plasschaert

INTRODUCTION
Whether or not the Chinese national currency, the renminbi (RMB), is
undervalued remains a real bone of contention. Loud voices are raised not
only in the American Congress but also by opinion-makers and even in
some academic circles; they advocate for protectionist measures to be
taken against the onslaught of imports from China, which, buttressed by
low wages and an intentionally weak local currency, is indicted with
causing the loss of numerous jobs in the US. The increasingly politicised
dispute has inflamed the official circles in both countries.
The Chinese leadership maintains that China's surplus is not primarily
shaped by the exchange rate, and that, unless the RMB was appreciating
`
intolerably, the US deficit vis-a-vis China would not be cured in essence.
In the same context, it is noteworthy that, whereas official IMF
statements express the view that the RMB is somewhat undervalued, the
IMF Executive Board, in its conclusions on the 2010 Article IV
Consultation, frankly confessed to dissension among its members.
Admittedly, the facts to which the critics of China refer cannot be
denied. Indeed, the deficit of the bilateral trade accounts between the USA
and China (and to a smaller extent the external current accounts) has
grown ominously in recent years.
As can be inferred from Table 9.1, in the 2007­10 period, annual US
exports to China amounted to less than a quarter of imports. In 2009,
trade was still affected by the ...