The People’s Republic of China’s Currency and Product Fragmentation

Nobuaki Yamashita

No 327, ADBI Working Papers from Asian Development Bank Institute

Abstract: This paper examines how an appreciation of the currency of the People’s Republic of China (PRC)—renminbi—affects the country’s exports in the context of production fragmentation, using a panel data set of the PRC’s trade for 1992/93–2008/09. It constructs two exchange rates for renminbi: one is a bilateral real exchange rate and the other is a real effective exchange rate against East Asian component suppliers. It is found that appreciation of the renminbi would somewhat offset a reduction in the volume of the PRC’s exports induced by lower importing costs of components. Hence, evidence casts further doubts on the efficacy of further unilateral reform of the renminbi exchange rate regime on correcting trade imbalances.

Keywords: renminbi; prc exports; production fragmentation; exchange rate regime (search for similar items in EconPapers)
JEL-codes: F14 F23 F31 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2011-11-30
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