Is the Renminbi Undervalued?
The debate over China’s currency policy has reached another critical junction: China’s central bank has just dropped its peg to the US dollar to allow for greater currency flexibilities. While it remains to be seen what this move actually will mean for key global exchange rates in future, and for the world economy, it comes after increased pressure on China to revaluate. A bill in the US Congress threatens China with punitive tariffs unless its currency is revalued, and recently the Obama administration reportedly came close to label China a currency manipulator. Europe has also jumped onto this bandwagon, accusing China of boosting its export to Europe with the help of an undervalued currency.
However, determining the right value of a currency is not an exact science, and estimates on the misalignment of the Chinese currency come to very different conclusions. Moreover, the alleged linkage between a depressed Renminbi and China’s current account surplus is tenuous. With what certainty can China be said to run an undervalued currency? And is it a traditional beggar-thy-neighbour philosophy that has determined the valuation?
ECIPE is pleased to invite you to a presentation by Sylvain Plasschaert, a Professor Emeritus of the University of Antwerp and the Catholic University of Leuven, and formerly at the World Bank. He has published extensively on economic developments in China and the presentation will be based on his forthcoming paper, Is the Renminbi Undervalued?, looking at macroeconomic facts beyond the political rhetoric.
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