China’s Renminbi: “Our Currency, Your Problem”? Harvard Case Solution & Analysis

The Chinese currency exchange, the renminbi, has remained a matter of controversy between China and its trade partners (especially the US), which accuse China of manipulating its exchange rate to make its exports artificially cheaper. They see the renminbi as an shameful weapon in worldwide competition. Chinese officials reacted that these attacks were groundless: the renminbi was not undervalued, at least not substantially. The peg led to maintaining a stable economic environment, which benefited all economic associates. Additionally they said that, if a large trade and budget deficit was running, it was partly attributable to capital inflow from China.

The US should concentrate on the weaknesses of its own economy that created these deficits, instead of treating China as a scapegoat. Officials also said that China was a monarch state with the right to choose its exchange rate policy. In the news, the discussion was often throughout 2005 to 2007 and it was likely that arguments would become tougher if US and European trade deficits with China continued to improve.


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China’s Renminbi: “Our Currency, Your Problem”?

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