A Resurgent Chinese Yuan Undervaluation and its International Trade Competitiveness

Abstract:     
This study analyzed the over-or-undervaluation of the Chinese Yuan (renminbi) against the USD, JPY and EUR using relative PPP method. We found that the Yuan is undervalued in its real terms against the USD by 21.3% and against the EUR by 17.4% between July 2005 and June 2010. We used the export growth and the world exports share methods to determine China's international trade competitiveness during the similar period of time. We found that the heavily managed Yuan has not altered China's international trade competitiveness after its de-pegging. We imply the findings that China has been protective by involving in large-scale one-direction intervention in the foreign exchange market, which is in contrary to Article IV of IMF.

Number of Pages in PDF File: 34

Keywords: De-pegging, International trade competitiveness, currency over-or-undervaluation, relative PPP theory

JEL Classification: E58, F31, G18

working papers series