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A Resurgent Chinese Yuan Undervaluation and its International Trade Competitiveness

34 Pages Posted: 7 Dec 2010 Last revised: 3 Oct 2011

Jothee Sinnakkannu

Monash Business School

Date Written: November 29, 2010

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.

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

JEL Classification: E58, F31, G18

Suggested Citation

Sinnakkannu, Jothee, A Resurgent Chinese Yuan Undervaluation and its International Trade Competitiveness (November 29, 2010). Finance and Corporate Governance Conference 2011 Paper; Monash U. Department of Business Law & Taxation Research Paper No. 1717254. Available at SSRN: https://ssrn.com/abstract=1717254 or http://dx.doi.org/10.2139/ssrn.1717254

Jothee Sinnakkannu (Contact Author)

Monash Business School ( email )

Wellington Road
Clayton, Victoria 3168
Australia

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