经管之家App
让优质教育人人可得
立即打开
One of the most notable macroeconomic developments inrecent years has been the sharp drop in China’s current-account surplus. The International Monetary Fund is now forecasting a2012 surplus of just 2.3% of GDP, down from a pre-crisis peak of 10.1% of GDPin 2007, owing largely to a decline in China’s trade surplus – that is,the excess of the value of Chinese exports over that of its imports.
The drop has been a surprise to the many pundits and policy analysts who view China’ssustained massive trade surpluses as prima facieevidence that government intervention has been keeping the renminbi far belowits unfettered “equilibrium” value. Does thedramatic fall in China’ssurplus call that conventional wisdom into question? Should the United States, the IMF, and other players stoppressing Chinato move to a more flexible currency regime?
The short answer is “no.” China’seconomy is still plagued by massive imbalances, and moving to a more flexibleexchange-rate regime would serve as a safety valve and shock absorber.
That said, the exchange rate has received far too much focus as alightning rod for concerns over China’sgrowing engagement in the global economy. The link between the exchange rateand China’spricing advantages in world markets is wildly exaggerated. At the same time, the exchange rate is by no means the most pressingmacroeconomic problem facing Chinatoday.
Rather, the biggest concern is China’s chronicover-reliance on investment as a driver of growth.
Investment constitutes almost half of GDP, more than twice the globalaverage. At the same time, private consumption is under 40% of GDP, with 60%being a more normal figure for economies at similar levels of development. China’sinvestment appetite is unquestionably drivenby huge intervention in the financial system: small savers receive only apaltry 1-2% on their deposits in an economy that until recently has been registering10% annual growth.
The dramatic fall in China’s current-account surplusreflects four main factors. First, the cost of raw-material imports has risensharply. At the same time, foreign demandfor China’sexports is sufficiently sensitive that it cannot simply pass on the entireadded cost.
A second important factor has been slow growthin the advanced economies, a byproduct of the financial crisis that islikely to persist for some time to come.
Third, China’strade-weighted real exchange rate (theexchange rate adjusted for inflation differentials) has actually appreciatedquite a bit in the past few years – by 14% since 2008, according to IMFestimates. China’sinflation has been higher than the average of its trading partners, and the renminbi has in fact strengthened gradually in nominalterms.
Finally, Chinaengaged in massive investment stimulus as a response to the financial crisis. China’sinvestment is far more import-intensive than itsconsumption, which has continued to trend downwards.Countries like Germany and Switzerland have been huge beneficiaries of China’sseemingly insatiable appetite for high-techcapital equipment.
Setting aside all ofthese specific drivers, we should hardly be surprised that China’s current-account surpluscollapsed in the wake of the globalfinancial crisis. With Chinacontinuing to record spectacular growth while the advanced economies wereexperiencing a deep slump, China’sexports, relative to imports, had nowhere to go butdown. Indeed, in retrospect, what issurprising is that China’strade surplus did not shrink even more.
The IMF reasonably predicts that, as the global economy normalizes overthe longer term, China’s current-account surplus will again occupy the sameweight in global imbalances as it did a few years ago (about 0.5% of globalGDP).
All of this underscores the point that there is no monotonic relationship between the exchange rate and thecurrent account. Capital-flow pressures, forexample, can exert strong pressures of their own on exchange rates,independently of trade.
China has very strong capital controls, but they are far from impervious. With the prospect of modest rates ofreturn in advanced economies, Chinahas inevitably become a more attractive investment destination, despite asignificant risk that Chinawill someday experience its own sharp slowdown and financial crisis. (Those whothink otherwise have succumbed to the “thistime is different” mindset that Carmen Reinhart and I have emphasized in ourresearch on financial crises through history.)
The real case for China moving to a more flexibleexchange rate is that in any kind of crisis – economic, political, or otherwise– the exchange rate can provide an important stabilizer. Even if the renminbi appreciated in the near term, the effect on tradewould probably be far less than American authorities wish and Chineseauthorities fear. Studies on exchange rate pass-throughsuggest that US consumers would only see a small fraction of the cost change.
The simplistic logic often used to link the exchange rate and the currentaccount is weak. But the case for China’s move to a more flexibleexchange-rate regime, as part of broader financial-market liberalization, remains strong.
the exchange rate is by no means the most pressingmacroeconomic problem facing Chinatoday.
Rather, the biggest concern is China’s chronicover-reliance on investment as a driver of growth.
The real case for China moving to a more flexibleexchange rate is that in any kind of crisis – economic, political, or otherwise– the exchange rate can provide an important stabilizer.Even if the renminbi appreciated in the near term, theeffect on trade would probably be far less than American authorities wish andChinese authorities fear.One of the most notable macroeconomic developments inrecent years has been the sharp drop in China’s current-account surplus. The International Monetary Fund is now forecasting a2012 surplus of just 2.3% of GDP, down from a pre-crisis peak of 10.1% of GDPin 2007, owing largely to a decline in China’s trade surplus – that is,the excess of the value of Chinese exports over that of its imports.
The drop has been a surprise to the many pundits and policy analysts who view China’ssustained massive trade surpluses as prima facieevidence that government intervention has been keeping the renminbi far belowits unfettered “equilibrium” value. Does thedramatic fall in China’ssurplus call that conventional wisdom into question? Should the United States, the IMF, and other players stoppressing Chinato move to a more flexible currency regime?
The short answer is “no.” China’seconomy is still plagued by massive imbalances, and moving to a more flexibleexchange-rate regime would serve as a safety valve and shock absorber.
That said, the exchange rate has received far too much focus as alightning rod for concerns over China’sgrowing engagement in the global economy. The link between the exchange rateand China’spricing advantages in world markets is wildly exaggerated. At the same time, the exchange rate is by no means the most pressingmacroeconomic problem facing Chinatoday.
Rather, the biggest concern is China’s chronicover-reliance on investment as a driver of growth.
Investment constitutes almost half of GDP, more than twice the globalaverage. At the same time, private consumption is under 40% of GDP, with 60%being a more normal figure for economies at similar levels of development. China’sinvestment appetite is unquestionably drivenby huge intervention in the financial system: small savers receive only apaltry 1-2% on their deposits in an economy that until recently has been registering10% annual growth.
The dramatic fall in China’s current-account surplusreflects four main factors. First, the cost of raw-material imports has risensharply. At the same time, foreign demandfor China’sexports is sufficiently sensitive that it cannot simply pass on the entireadded cost.
A second important factor has been slow growthin the advanced economies, a byproduct of the financial crisis that islikely to persist for some time to come.
Third, China’strade-weighted real exchange rate (theexchange rate adjusted for inflation differentials) has actually appreciatedquite a bit in the past few years – by 14% since 2008, according to IMFestimates. China’sinflation has been higher than the average of its trading partners, and the renminbi has in fact strengthened gradually in nominalterms.
Finally, Chinaengaged in massive investment stimulus as a response to the financial crisis. China’sinvestment is far more import-intensive than itsconsumption, which has continued to trend downwards.Countries like Germany and Switzerland have been huge beneficiaries of China’sseemingly insatiable appetite for high-techcapital equipment.
Setting aside all ofthese specific drivers, we should hardly be surprised that China’s current-account surpluscollapsed in the wake of the globalfinancial crisis. With Chinacontinuing to record spectacular growth while the advanced economies wereexperiencing a deep slump, China’sexports, relative to imports, had nowhere to go butdown. Indeed, in retrospect, what issurprising is that China’strade surplus did not shrink even more.
The IMF reasonably predicts that, as the global economy normalizes overthe longer term, China’s current-account surplus will again occupy the sameweight in global imbalances as it did a few years ago (about 0.5% of globalGDP).
All of this underscores the point that there is no monotonic relationship between the exchange rate and thecurrent account. Capital-flow pressures, forexample, can exert strong pressures of their own on exchange rates,independently of trade.
China has very strong capital controls, but they are far from impervious. With the prospect of modest rates ofreturn in advanced economies, Chinahas inevitably become a more attractive investment destination, despite asignificant risk that Chinawill someday experience its own sharp slowdown and financial crisis. (Those whothink otherwise have succumbed to the “thistime is different” mindset that Carmen Reinhart and I have emphasized in ourresearch on financial crises through history.)
The real case for China moving to a more flexibleexchange rate is that in any kind of crisis – economic, political, or otherwise– the exchange rate can provide an important stabilizer. Even if the renminbi appreciated in the near term, the effect on tradewould probably be far less than American authorities wish and Chineseauthorities fear. Studies on exchange rate pass-throughsuggest that US consumers would only see a small fraction of the cost change.
The simplistic logic often used to link the exchange rate and the currentaccount is weak. But the case for China’s move to a more flexibleexchange-rate regime, as part of broader financial-market liberalization, remains strong.
扫码加好友，拉您进群
全部版块
我的主页
收藏
