Why fuss over RMB depreciation?
- By He Weiwen
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E-mail China.org.cn, August 31, 2015
Exchange Rate Has Little Impact on China-US Trade
The growth curve of China-US bilateral trade over the past 8 years does not show any strong linkages between the RMB/dollar exchange rates and the bilateral trade performances.
Ironically, according to the US ITA official trade statistics, the appreciation of the RMB to the dollar has helped Chinese exports to the US. When RMB was pegged again to the dollar in 2008, Chinese exports to the US grew more slowly (by only 5.1%, compared to 7.5% growth in the world exports to the US). During the period of 2010-2014 when RMB floated again and appreciated to the dollar, Chinese exports to the US grew faster than to the rest of the world (57.5%:50.5%). During the first half of 2015, when the RMB was as strong as the dollar, Chinese exports to the US still grew by 5.9%, while the rest of the world saw a 3.4% decline.
As regards US exports to China, there has been a fast weakening in its growth momentum over the past 18 months. In 2014, US exports to the world grew by 2.7%, but grew by a mere 1.6% to China. During the first half of 2015, US exports to China declined by 4.5%, approximately the same rate as its exports to the world (off 5.2%). The reason of its exports to China could be found, to a large extent, in the sharp fall of agricultural exports, which fell by $ 1.01 billion, 38.4% of the total net decline, while its exports of transportation equipment, computer and electronics, and chemicals combined grew by $ 450 million. The four categories shared the same exchange rate but had drastically different performances. Hence, the figures cannot be explained by the RMB exchange rate. According to official Chinese trade data, the value of its soybean imports (predominantly from the US) during the Jan.-July period fell by 19.6% over a year ago, although the import quantity grew by 7.0%. The reason is apparently the sharp fall of soybeans prices in the world market. It can also be demonstrated by the similar pattern of US agricultural exports to the world, which fell by $ 12.09 billion over the first half of 2015, accounting for 28.9% of the total net export decline.
In conclusion, the primary factor affecting China-US bilateral trade performance is the trade structures and world commodities market, rather than the exchange rates between the RMB and the dollar. The two nations and business communities should focus on identifying the complementary sectors and products of the two countries and seeking a sustainable pattern of stable growth based on mutual benefit.
He Weiwen is co-director of the China-US/EU Study Center at the China Association of International Trade.
This post was first published at Chinausfocus.com To see the original version please visit: http://www.chinausfocus.com/finance-economy/why-fuss-over-rmb-depreciation/
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