Can Renminbi Appreciation Reduce the US Trade Deficit?

Jian Zhang, Hung‐Gay Fung and Donald Kummer

China & World Economy, 2006, vol. 14, issue 1, 44-56

Abstract: Using a computational general equilibrium model, we analyze the impacts of Chinese real exchange rate appreciation on the trade balance of China and the USA and on various industries of both countries. We use several scenarios with 2.1, 6 and 12 percent real exchange rate appreciations for our simulation analysis. The results indicate that China's exchange rate appreciation might not solve the enlarging US current account deficits. Chinese outputs in both primary and manufacture sectors will increase, whereas the outputs of energy and services sectors will be adversely affected. The price of value‐added products declines in light of the renminbi appreciation. (Edited by Zhinan Zhang)

Date: 2006
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