http://www.nbr.org - NBR - The National Bureau of Asian Research


Appears in
Renminbi Revaluation
Sep 2003

Renminbi Revaluation

Joseph P. Ferguson

As the U.S. trade deficit with China balloons, calls are being made in the United States for the Chinese government to revalue its currency, the renminbi (or yuan). The argument, in its briefest form, is that if the renminbi (which has thus far been pegged to the dollar at the approximate rate of 8.3 to 1) is allowed to grow in value relative to the dollar, then Chinese goods will become more expensive, and U.S. goods in China will become cheaper. Theoretically this means that the U.S. trade deficit with China should shrink, and that manufacturing jobs in the United States will be saved.