The imbalance between China’s currency, the RMB, and those of other countries is widely regarded as a major problem for the world economy. There was a reform of China’s exchange rate mechanism in 2005, following which the RMB appreciated 17% against the US dollar, but many people argue that further reform is still needed. This book reports on a major research project undertaken following the 2005 reform to assess the impact on China’s economy. It considers the impact in a number of areas of the economy, including export-oriented companies, the banking industry, international trade, international capital flows, and China’s macroeconomic policy. It concludes that the policies pursued so far have been correct, and that further reform, both to the exchange rate, and to the system overall, would be desirable, but that any reform should be gradual and incremental, preserving economic stability, and integrating changes with reform in other parts of the economy.
Introduction Foreword Summary of Research Results 1. Analysis of the Impact of RMB Exchange-Rate Adjustments on China’s Economy and National Welfare 2. The Impact of an Appreciating RMB on China’s Import and Export Trade 3. The Impact of RMB Exchange-Rate Adjustments on Enterprises and Industries Involved in Foreign Trade 4. Analysis of the Effect of Exchange-Rate Fluctuations on the Banking Industry 5. Evaluating the ‘Real Equilibrium Exchange Rate’ of the RMB 6. China’s Strategy for Reforming its RMB Exchange-Rate Policy and Macroeconomic Policies in Support of that Strategy 7. An International Comparison of Exchange-Rate Policies in Countries that have Undergone Economic Transition