The Role of the Real Exchange Rate Adjustment in Expanding Service Employment in China

Yingfeng Xu and Xiaoyi Yan ()
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Xiaoyi Yan: Department of Human Resources and Social Development Canada, Postal: 140 Promenade du Portage Phase IV, 5th Flr., Gatineau, QC K1A 0J9, Canada

No 2009-11, Working Papers from University of Alberta, Department of Economics

Abstract: It is widely accepted that China needs to shift from its past mode of export-led growth and start to rely more on domestic demand. What role could the real appreciation of the Chinese yuan play in this regard? We attempt to quantify the impact on the structure of the Chinese economy of the real appreciation of the Chinese yuan. We argue that the potential of the service sector to generate income and jobs may be significantly under-estimated by official statistics, as a result of the under-estimation of household consumption of services. While there is no evidence of large under-valuation for the Chinese yuan, we do find that a real appreciation in the order of 20% would bring the Chinese price level in line with the world average level, after the Balassa-Samuelson effect is factored in. In turn, such a real appreciation could increase the service share of employment by 7%.

Keywords: China; real exchange rate; service sector (search for similar items in EconPapers)
JEL-codes: E01 E21 F31 O53 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2009-02-10
New Economics Papers: this item is included in nep-cna, nep-dev, nep-mac and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:ris:albaec:2009_011

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