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Contributions from
the Column
Facts and trends
WFP opposes strict WTO rules
G8 cancels debt and cuts aid
Climate protection after Kyoto
EU looks for its role in development policy
Africa suffers from lack of harmonisation
KfW Development Bank gains
Spam mails impede development
Aid does not reach the poor
Trade: Renminbi appreciation would have no effect
07/2005
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US deficit: Renminbi
appreciation would have no effect
For years, the US administration has been calling for China to appreciate its currency in relation to the US dollar. The USA claims that the Chinese renminbi, which is pegged to the dollar, is undervalued and that export goods from the People’s Republic are therefore artificially reduced in price and push out US products. The administration assumes an appreciation of the renminbi would lead to a decrease in Chinese exports and reduce the USA’s huge trade deficit. A recent study by the Asian Development Bank (ADB) dampens this hope. According to calculations by economist Cyn-Young Park, a ten-percent appreciation of the renminbi would only reduce the US deficit by 0.5 percent, or by 0.02 percent of US gross domestic product. With an appreciation of 20 percent, the figures increase to 1.2 percent and 0.05 percent respectively. In short, an appreciation of the renminbi would have scarcely any impact on the United State’s trade balance. According to the development bank’s study, one reason for this is that – contrary to what the debate in the USA suggests – China has a relatively small share in US trade. In 2004, imports from China accounted for 13.4 percent, while exports to the People’s Republic accounted for only 4.3 percent of the United State’s total foreign trade. (ell)
On the Internet:
http://www.adb.org/Documents/EDRC/Policy_Briefs/PB037.pdf
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