International Economics

India’s Mistaken Call for Renminbi Appreciation

0 13

By Jagdish Bhagwati | 05 June 2010


renminbi

India’s central bank governor issued in late April a critique of the alleged Chinese undervaluation of the yuan/renminbi, siding therefore with the U.S. politicians and some think-tanks (chiefly Fred Bergsten and Arvind Subramanian of the Peterson Institute for International Economics) against China. I and Arvind Panagariya at Columbia published a critique of this decision in the Times of India, India’s leading daily. While that op-ed lays out our arguments fully, and we consider the central banker’s pronouncement a mistake, here I state the flaws in the central banker’s position and argue why his mistake must be corrected.

 

 

The underlying argument is based on a syllogism. The first argument is that an undervalued renminbi is the root cause of the Chinese current account surpluses and the United States current account deficits. The second argument is that the export expansion so achieved by China robs countries such as Brazil and India of their export markets.

 

But neither argument is acceptable. Consider first the error in the second argument. Just because China fixes its exchange rate against the U.S. dollar does not mean that India cannot choose the value of its currency against the dollar or other currencies including the renminbi at the level it sees appropriate for itself. What happens to India’s exports and imports depends on what it does to its own exchange rate, money supply and fiscal deficits and how its savings and investment are balanced.

 

 


Read more…

About the author / 

CESRAN Int.

Leave a reply

You must be logged in to post a comment.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

CESRAN Blog

  • 24th Issue is Online Now!

    Vol. VI | No. III – July-August-September 2020 To Download the Magazine Click Here… CONTENTS 05-14….. World News by Ebru Birinci 17-24….. Preparedness for an Uncertain Future “The Only Thing We Have to Fear is Fear Itself” by Professor Mark Meirowitz 25-39….. EU LAW vs UK LAW The Primacy of EU Law over National Law:…

  • IEPAS2020 is Going Virtual!

    Dear Friends and Colleagues, IEPAS2020 is Going Virtual! Due to the COVID19 pandemic, we are holding our entire conference virtually by streaming all of the live sessions. You may participate in all of our virtual networking events. In case of missing a session, you may get full access to the replays of every session since all…

  • The 13th issue of JCTS (Journal of Conflict Transformation & Security) is out now…

    The 13th issue of JCTS (Journal of Conflict Transformation & Security) is out now… Vol. 8 | No. 1 | 2020 Click here to Download the Entire Issue   TABLE OF CONTENTS Editor’s Note By David Curran Introduction By Nergis Canefe Research Articles Statelessness as a Permanent State: Challenges to the Human Security Paradigm By…

  • The 19th Issue of The Rest: Journal of Politics and Development is Out Now!

    The 19th issue of the rest: journal of politics and development is out now. Download the issue here… TABLE OF CONTENTS Research Articles Turkish AK Parti’s Posture towards the 2003 War in Iraq: The Impact of Religion amid Security Concerns By Alberto Gasparetto Nigeria and the Great Powers: The Impacts of the Boko Haram Terrorism on…

  • CESRAN International Named again amongst the Top Think Tanks in the World

    CESRAN International is pleased to announce that it has been named again amongst the world’s best think tanks. The 2019 Global Go To Think Tank Index ranked CESRAN International 141st among the World’s “Top Think Tanks in Western Europe” 75th among the World’s “Top Environment Policy Think Tanks” 153rd among the World’s “Top Foreign Policy…

  • THE 18TH ISSUE OF THE REST: JOURNAL OF POLITICS AND DEVELOPMENT IS OUT NOW.

    The 18th issue of the rest: journal of politics and development is out now. Download the issue here… TABLE OF CONTENTS Research Articles The Foreign Policy Decision Making Approaches and Their Applications Case Study: Bush, Obama and Trump’s Decision Making towards Afghanistan and the Region By Sharifullah Dorani Evaluating the Explanatory Power of Social Identity Theory,…

Newsletter