The Foreign Exchange Policy of China – Is the Country a “Currency Manipulator”?

Zhelev, Paskal (2022): The Foreign Exchange Policy of China – Is the Country a “Currency Manipulator”? Published in: UNWE Monetary Research Center Conference Papers No. 8th annual monetary and economic scientific conference (2022): pp. 1-13.

Abstract

China’s exchange rate policy has been one of the most contentious economic issues in present times. The large open economy with a state-led development model has been often accused of deliberately keeping its currency undervalued, thereby conferring unfair competitive advantages to its exporters, and fuelling global imbalances. The experts’ opinions on that however are greatly divided. The paper’s main goal is to evaluate whether China has been manipulating the exchange rate of the RMB through its exchange rate policy over the last decade. Based on various indicators, the results show that there is no evidence of China engaging in currency manipulation to the detriment of its trading partners.

• Item Type: MPRA Paper
• Language: English
• Keywords: Renminbi (RMB), undervalued exchange rate, currency manipulation, foreign exchange reform.
• Subjects: F - International Economics > F3 - International Finance > F31 - Foreign Exchange; F - International Economics > F3 - International Finance > F33 - International Monetary Arrangements and Institutions; F - International Economics > F5 - International Relations, National Security, and International Political Economy > F50 - General

References

BBC news (2020) US reverses China 'currency manipulator' label, 14 Jan. 2020, available at: https://www.bbc.com/news/business-51098294

Bergsten C., J. Gagnon (2017) Currency Conflict and Trade Policy: A New Strategy for the United States, Peterson Institute for International Economics

Cagnon, J., Ch. Collins (2019) Despite Minor Changes in Treasury's Foreign Exchange Report, Major Flaws Remain, PIIE Trade and Investment Policy Watch, available at: https://www.piie.com/blogs/trade-investment-policy-watch/despite-minor-changes-treasurys-foreign-exchange-report-major

Cagnon, J., M. Sarsenbayev (2021) Currency manipulation rebounded in 2020 as pandemic concerns rose, PIIE Realtime Economic Issues Watch, available at: https://www.piie.com/blogs/realtime-economic-issues-watch/currency-manipulation-rebounded-2020-pandemic-concerns-rose

Council on Foreign Relations (2020) Tracking Currency Manipulation, https://www.cfr.org/article/tracking-currency-manipulation#chapter-title-0-2

Das, S. (2019) China’s Evolving Exchange Rate Regime, IMF Working Paper WP/19/50

Eagle, J. (2022) The Big Mac Index: A Measure of Purchasing Power Parity & Burger Inflation, Visual Capitalist, available at: https://www.visualcapitalist.com/cp/big-mac-index-purchasing-power-parity-burger-inflation/

IMF (2019) People’s Republic of China: Article IV Consultation – Press Release, IMF Country Report No. 19/266, Washington D.C., available at: https://www.imf.org/en/Publications/CR/Issues/2019/08/08/Peoples-Republic-of-China-2019-Article-IV-Consultation-Press-Release-Staff-Report-Staff-48576

IMF (2022a) People’s Republic of China: 2021 Article IV Consultation – Press Release, IMF Country Report No. 2022/021, Washington D.C., available at: https://www.imf.org/en/Publications/CR/Issues/2022/01/26/Peoples-Republic-of-China-2021-Article-IV-Consultation-Press-Release-Staff-Report-and-512248

IMF (2022b) International Financial Statistics, available at: https://data.imf.org/?sk=4c514d48-b6ba-49ed-8ab9-52b0c1a0179b

Kwan, C.H. (2005) Reform of China's Foreign Exchange Rate System: How the Newly Adopted Managed Floating System Actually Works. Nomura Capital Market Review, Vol. 8, No. 4, pp. 38-42, available at: https://ssrn.com/abstract=876390

Obstfeld, M., K. Rogoff (2009) Global imbalances and the financial crisis: Products of common causes. London: Centre for Economic Policy Research

Sanford, J. (2011) Currency Manipulation: The IMF and WTO, CRS Report for Congress RS22658, Congressional Research Service, available at: https://sgp.fas.org/crs/misc/RS22658.pdf

The Economist (2022) The Big Mac Index – Interactive Comparison Tool, available at: https://www.economist.com/big-mac-index

U.S. Congress (1988) Omnibus Trade and Competitiveness Act of 1988, Public Law 100-418, available at: https://www.congress.gov/100/statute/STATUTE-102/STATUTE-102-Pg1107.pdf

U.S. Congress (2015) Trade Facilitation and Trade Enforcement Act, Public Law 114–125, available at: https://www.congress.gov/114/plaws/publ125/PLAW-114publ125.pdf

U.S. Department of Treasury (2019) Treasury Designates China as a Currency Manipulator, press release, available at: https://home.treasury.gov/news/press-releases/sm751

U.S. Department of The Treasury (2021) Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States, Report to Congress

Wang, Zh. (2017) China’s Exchange Rate Policy Making: International Pressures Meet Domestic Politics, Asian Studies Review, 41:1, 20-39

Yang, J., Yin, H., H. He (2007) The Chinese Currency: Background and the Current Debate, Intl Journal of Public Administration, 30:2, 117-135

Yang, J. (2014) The Big Mac Index and the Valuation of the Chinese Currency, The George Washington University Center for the Study of Globalization, available at: https://www.researchgate.net/publication/238671418_The_Big_Mac_Index_and_the_Valuation_of_the_Chinese_Currency