Advantage and Disadvantage of Raising the exchange rate of RMB 中国&cc

Advantage and Disadvantage of Raising the exchange rate of RMB 中国&cc

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Gao 1 Advantage and Disadvantage of Raising the exchange rate of RMB
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Gao 2 Yutong Gao Chinese Economy Guijun Lin 2011/8/7
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Gao 3 Yutong Gao Professor Guijun Lin Chinese Economy August 7 th 2011 Advantage and Disadvantage of Chinese Economy The issue of the exchange rate of Chinese Renminbi (RMB) has been one of the most serious arguments among and between the economists and politicians in the past decades. This change not only brought out a lot of challenges in domestic but also made a big difference in foreign countries. In this paper, we will briefly focus on why RMB has to raise its exchange rate, and what advantages and disadvantages of raising the exchange rate have. First of all, the main reasons why RMB is faced with appreciation pressure are following. On the one hand huge surplus is the direct cause of the appreciation pressure that China is facing. But deep down, on the other hand, monetary issue and currency exchange rate are not the actual causes. Instead, as what Hongcai Xu claims, “It is because that China’s economy has been performing surprisingly well in a global context of recession, and that China had enjoyed continuous fast development over a particular period of time. This is exhibited in the dual movement in price of tradable products and untradeable products.” ( Wage, Exchange Rate and Trade Surplus Rebalancing Path Selection for China’s Economy , 10) The core of RMB appreciation pressure is that productivity in tradable sector grows faster than pay rise, which
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Gao 4 leading to an absolute or relative price drop in export products, therefore causing RMB appreciation pressure for China. However, another main factor of RMB exchange rate appreciation is that many of the famous scholars and the institutes have
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This note was uploaded on 02/28/2012 for the course ECON 111 taught by Professor Aaa during the Summer '11 term at UIBE.

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Advantage and Disadvantage of Raising the exchange rate of RMB 中国&cc

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