Is China a 'Currency Manipulator'?: The Legitimacy of China’s Exchange Regime Under the Current International Legal Framework

The International Lawyer, Vol. 43, No. 3, pp. 1257-1300, Fall 2009

52 Pages Posted: 11 Nov 2009

See all articles by Bryan Christopher Mercurio

Bryan Christopher Mercurio

Chinese University of Hong Kong - Faculty of Law; University of New South Wales - Faculty of Law

Celine Sze Ning Leung

affiliation not provided to SSRN

Date Written: November 11, 2009

Abstract

While most economists are in agreement that China’s currency is undervalued, economists are less certain as to the effect of the undervaluation. Despite the equivocal data, critics of China’s regime claim that the undervaluation leads to cheaper, and therefore increased exported goods, while at the same time raising the price of imported goods. For this reason, U.S. lawmakers perpetually raise the issue and periodically initiate legislation, which would deem China a “currency manipulator” and thus trigger retaliatory measures. Lawyers are less certain whether there can be a multilateral solution to the perceived problem.

With the existing legal literature consisting mostly of industry-funded research, the time is ripe to undertake a large-scale legal analysis of China’s exchange regime under the existing international legal framework. This article undertakes such an analysis and in particular, evaluates the legitimacy of China’s exchange regime under applicable international law, that being the Articles of Agreement of the International Monetary Fund (IMF) and both the General Agreement on Tariffs and Trade and the Agreement on Subsidies and Countervailing Measures of the World Trade Organization (WTO). We conclude that while China clearly manipulates its currency, its measures are not inconsistent with the IMF Articles or the applicable WTO agreements. The article concludes by noting that modification of either the IMF Articles or applicable WTO agreements is the only multilateral option available to those determined to more strongly sanction “currency manipulation”.

Keywords: international trade, currency manipulation, China, WTO, IMF, GATT, subsidies

JEL Classification: K33, F02, F10, F13, F14, F15, F33

Suggested Citation

Mercurio, Bryan Christopher and Leung, Celine Sze Ning, Is China a 'Currency Manipulator'?: The Legitimacy of China’s Exchange Regime Under the Current International Legal Framework (November 11, 2009). The International Lawyer, Vol. 43, No. 3, pp. 1257-1300, Fall 2009. Available at SSRN: https://ssrn.com/abstract=1504371

Bryan Christopher Mercurio (Contact Author)

Chinese University of Hong Kong - Faculty of Law ( email )

6/F Western Teaching Complex
Shatin, New Territories
Hong Kong
(852) 2696 1139 (Phone)

University of New South Wales - Faculty of Law

Kensington, New South Wales 2052
Australia

Celine Sze Ning Leung

affiliation not provided to SSRN ( email )

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