ShouldRMBAppreciate人民币应该升值.pptVIP

Should RMB Appreciate?人民幣應該升值? Shih-Hsin Economics Seminar (世新經濟2003年學術研討會) October 4, 2003 Erh-Cheng Hwa 華而誠 echwa@cc.shu.edu.tw A Preamble Lately, RMB, the Chinese currency, has certainly become one of the hottest subjects in international finance. For instance, G7 without implicating China by name called for a more flexible Asian currencies a couple of weeks ago. That the currency of a developing economy with an average income of merely US3,500 or so should command such an attention comes as a bit of a surprise. Why RMB all a sudden occupies the international spotlight? My speech will (I) analyze the background of the international call for an RMB appreciation, (II) answer the question: is RMB undervalued? And (III) ask if the revaluation will indeed solve the US deficit problem and for that matter restore global economic imbalance? And if not, what need to be done (conclusion). I. Background: Global Economic Imbalance The global economy is characterized by a significant structural imbalance with the US economy running a large current account deficit of over 5% of GDP in 2003 while Europe, Japan, and the rest of East Asia running significant current account surpluses. (Table 1) This large and rising US current account deficit has triggered a US dollar depreciation since early 2002. This is a clear sign that US current account deficit appears to be no longer sustainable and is indeed of correction. Why an ever rising deficit is not sustainable? This is because eventually the rising debt service will have to come out of national output and start to hurt consumption and investment. Since the US has a negative net international investment position already one quarter of GDP, the day of reckoning would arrive, if the deficit continues. (“Perspectives on the U.S. Current Account Deficit and Sustainability”, Catherine L. Mann, Journal of Economic PerspectivesVolume 16, November 3Summer 2002152.) The global economic imbalanc