China's Exchange Rate Movements and Corporate Currency Invoicing Strategies

Jingtao Yi

China & World Economy, 2009, vol. 17, issue 5, pages 36-51

Abstract: Since China introduced a new managed floating exchange rate regime in 2005, the persistent appreciation of the renminbi against the US dollar has led Chinese firms to reassess their choice of invoice currency among the dollar and other international alternatives to price their exports. The present paper performs a systematic invoice currency analysis by surveying the published literature, summarizing criteria for decision-making, and evaluating the choices available to Chinese exporters implementing currency invoicing strategies to maximize expected profits. This study finds that the euro could play an increasing role as the invoice currency of Chinese firms, although the US dollar will still play a dominant role. Chinese exporters might shift gradually from the dollar to the euro in the face of the falling dollar, balancing between the two by necessity. Copyright (c) 2009 The Author Journal compilation (c) 2009 Institute of World Economics and Politics, Chinese Academy of Social Sciences.

Date: 2009

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