This time, it is the IMF that seems to be on Chinas side. In its annual report on the Chinese economy, the Fund emphasised that the benefits from a renminbi appreciation - a much contentious issue between the two largest economies of the world - would be marginal.
"A twenty per cent trade-weighted appreciation in the renminbi - a level similar to that demanded by many American lawmakers - would increase growth in the US economy by between 0.05 and 0.07 percentage points," the IMF was quoted by FT.
Simultaneously, Chinas June inflation surged year-on-year by 6.4 percent in June - the fastest in three years. Such persistently high inflation levels weaken the US argument of enforcing an appreciation of the renminbi.
Rising inflationary pressures in the Chinese economy mean that the renminbi has appreciated considerably in real terms relative to the nominal appreciation often challenged by the US. Calculations by the Economist magazine claim that the real exchange rate of the renminbi against the dollar has appreciated by as much as 50 percent since 2005.
At the same time, the US should take heed of the IMFs finding that the integrated effective exchange rate - which takes into account the exchange rates of all supplier economies for Chinas export products - has appreciated much more slowly than the conventional exchange rate.
A professor from the University of California - Berkeley aptly summarises the implications of this: "Chinas share of the value-added...products is only 10 to 30 percent. So a 20 percent appreciation of the renminbi has a much smaller effect on the prices of American imports from China, unless the renminbi appreciation is matched by comparable appreciations in the currencies of the Asian countries supplying components to China."
Even though increasing Chinese inflation dampens arguments in favour of appreciating the renminbi, it may be beneficial for the Chinese policymakers to evaluate the option of an appreciation to control the monstrous inflation brewing in their country.
While the country has adopted tightening measures (the interest rate was raised for the fifth time in the last eight months), rising prices of international commodities; especially oil and food commodities, has brought home the issue of imported inflation. And an insufficiently-appreciated renminbi is not much help in curbing that.
An appreciation of the Chinese currency would render these commodities cheaper for Chinese consumers in dollar terms, helping bring down imported inflation.
Therefore, when the Chinese premier, Wen Jiabao, said a few months back that Beijing would, along with other policy measures, work towards increasing yuan exchange rate flexibility, one can understand his reasoning behind the statement.
For Chinese policymakers, the issue remains a precarious one. While a renminbi appreciation is warranted keeping in mind imported inflation; the magnitude of the same needs to be evaluated carefully.
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