Is RMB’s Appreciation Harming Chinese Exporters?

Historically RMB was pegged to US dollar for a long time after Chinese monetary reform in 1980s. However, recently this foreign exchange policy has been challenged by new trends of global economy and increasing pressure by China’s trade partners. People’s Bank of China announced a more “flexible” foreign exchange and gradually liberalized RMB to US dollar in 2005. RMB to US dollar rate decreased from 8.2 to 6.6 in 2011. Meanwhile China’s exporters are grumbling with this change as they complain a “trade barrier” emerges.

When global economy moves into a downturn, there is no doubt China’s export-oriented economy is a victim. Under this circumstance, any assertion that a flexible RMB encumbers exportation needs more thinking.