Thursday 26 Nov 2020 | 01:17 | SYDNEY
Thursday 26 Nov 2020 | 01:17 | SYDNEY

The RMB appreciation mystery


Mark Thirlwell

1 October 2010 11:34

Further to my earlier post, one aspect of the RMB debate which has always puzzled me is the argument by some supporters of Beijing's stance that moving on the currency would make no real difference to China. If that's right, then Beijing's often repeated determination not to allow exchange rate appreciation would appear to make no sense. 

After all, if you could win international kudos and defuse a problem in your most important bilateral relationship at no cost to yourself, why wouldn't you move' Presumably only because you don't want to be seen to 'give in' to external pressure: an argument that is not going to win over many in the other camp. 

In this light, Premier Wen Jiabao's comments in a recent speech in the US, that a large RMB appreciation would produce job losses, bankruptcies and hence major turbulence back home, seems to me to be a much more understandable and compelling reason for Beijing's caution when it comes to exchange rate policy.

There's a different argument that says that RMB appreciation would make no difference to the US: a stronger RMB would leave US production unchanged and simply displace Chinese production with products from other emerging markets. Which would at least be good news for the latter.

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