China's Exchange Rate Policy, Its Current Account Surplus and the Global Imbalances

A recent paper by Max Corden in the Economics Journal has a good account of the "China surplus" debate.

China's Exchange Rate Policy, Its Current Account Surplus and the Global Imbalances

W. Max Corden 1
University of Melbourne

ABSTRACT

This article is stimulated by current criticisms of Chinese exchange rate policy. The concern is really about China's current account surplus. The article discusses the factors that determine the surplus, and the reasons why the surplus increased sharply from 2005. The international implications of China's surplus and growth are discussed, and how it has affected the world real interest rate, and through that the US current account deficit. The surplus has had various international relative price effects, which have produced both gainers and losers. Finally, the surplus played only a small part in determining the world credit crisis.


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