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Hui Tong - One of the best experts on this subject based on the ideXlab platform.
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effects of Renminbi appreciation on foreign firms the role of processing exports
Journal of Development Economics, 2015Co-Authors: Barry Eichengreen, Hui TongAbstract:We examine the impact of Chinese currency (Renminbi) revaluation on firm valuations, focusing on the effect of surprise announcements of changes in China's currency policy on 9753 manufacturing firms in 44 countries. Renminbi appreciation has no significant impact on the valuation of firms in sectors exporting to China on average. But this “non-result” confounds a positive effect on firms in sectors exporting final goods to China with a negligible effect on those providing inputs for China's processing exports. We also find no significant effect on firms in sectors competing with China at home and in third markets. But again this “non-result” confounds the positive effect on firms competing with China in final goods with an insignificant effect on firms competing with China's processing exports. When evaluating the effects of Renminbi appreciation on other countries, it follows, distinguishing processing trade from trade in final goods is key.
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the external impact of china s exchange rate policy evidence from firm level data
National Bureau of Economic Research, 2011Co-Authors: Barry Eichengreen, Hui TongAbstract:We examine the impact of Renminbi revaluation on firm valuations, considering two surprise announcements of changes in China's exchange rate policy in 2005 and 2010 and data on 6,050 firms in 44 countries. Renminbi appreciation has a positive effect on firms exporting to China but little positive or even a negative impact on those providing inputs for China's processing exports. Stock prices rise for firms competing with China in their home market while falling for firms importing Chinese products with large imported-input content. Renminbi appreciation also reduces the valuation of financially-constrained firms, particularly in more financially integrated countries.
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the external impact of china s exchange rate policy evidence from firm level data
IMF Working Papers, 2011Co-Authors: Barry Eichengreen, Hui TongAbstract:We examine the impact of Renminbi revaluation on foreign firm valuations, considering two surprise announcements of changes in China’s exchange rate policy in 2005 and 2010 and employing data on some 6,000 firms in 44 economies. Stock returns rise with Renminbi revaluation expectations. This reaction appears to reflect a combination of improvements in general market sentiment and specific trade effects. Expected Renminbi appreciation has a positive effect on firms exporting to China but a negative impact on those providing inputs for the country’s processing exports. Stock prices rise for firms competing with China in their home market but fall for firms importing Chinese products with large imported-input content. There is also some evidence that expected Renminbi appreciation reduces the valuation of financially-constrained firms, presumably because appreciation implies reduced Chinese purchases of foreign securities. The results carry over when we consider ten instances of market-perceived changes in prospective Chinese currency policy.
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the impact of chinese exchange rate policy on global stock markets evidence from firm level data
2011Co-Authors: Barry Eichengreen, Hui TongAbstract:This paper examines the impact of Renminbi revaluation on foreign firm valuation and, by implication, firm prospects. To deal with the potential endogeneity of exchange rate movements, we consider not just official announcements of exchange rate policy but also 27 instances of market-perceived changes in China’s currency policy driven by domestic or foreign political pressure. Using information on 12,300 firms in 44 countries, we find that stock returns increased with Renminbi revaluation expectations. This reaction was related as much to improved market sentiment as to specific trade channels, however. In terms of trade channels, we find that expectations of Renminbi appreciation reduce the relative stock returns of firms providing components and raw materials to China as inputs for the country’s exports. There is also some evidence that expectations of Renminbi appreciation reduce the stock prices of financially-constrained firms.
Barry Eichengreen - One of the best experts on this subject based on the ideXlab platform.
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effects of Renminbi appreciation on foreign firms the role of processing exports
Journal of Development Economics, 2015Co-Authors: Barry Eichengreen, Hui TongAbstract:We examine the impact of Chinese currency (Renminbi) revaluation on firm valuations, focusing on the effect of surprise announcements of changes in China's currency policy on 9753 manufacturing firms in 44 countries. Renminbi appreciation has no significant impact on the valuation of firms in sectors exporting to China on average. But this “non-result” confounds a positive effect on firms in sectors exporting final goods to China with a negligible effect on those providing inputs for China's processing exports. We also find no significant effect on firms in sectors competing with China at home and in third markets. But again this “non-result” confounds the positive effect on firms competing with China in final goods with an insignificant effect on firms competing with China's processing exports. When evaluating the effects of Renminbi appreciation on other countries, it follows, distinguishing processing trade from trade in final goods is key.
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Renminbi internationalization achievements prospects and challenges
2015Co-Authors: Barry Eichengreen, Masahiro KawaiAbstract:China's major monetary policy goal is the internationalization of the renmimbi - to create an international role for its currency akin to the international role currently played by the US dollar. Renminbi internationalization is a hot topic, for good reason. It is, essentially, a window onto the Chinese government's aspirations and onto the larger process of economic and financial reform. Successfully internationalizing the currency will require rebalancing the Chinese economy. It will require developing the country's financial markets. It will require opening those markets to the rest of the world and, inter alia, moving to a more flexible exchange rate. In other words, it is a monetary and financial issue with much broader, supra-monetary and financial implications. This book provides a window into the larger issues of economic, financial and social reform in what will eventually be the world's largest economy.
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RMBI or RMBR: Is the Renminbi Destined to Become a Global or Regional Currency?
National Bureau of Economic Research, 2015Co-Authors: Barry Eichengreen, Domenico LombardiAbstract:Previous studies have focused on when the Renminbi will play a significant role as an international currency, but less attention has been paid to where. We fill this gap by contrasting two answers to the question. One is that the Renminbi will assume the role of a global currency similar to the U.S. dollar. Supporters point to China’s widely diversified trade and financial flows and to its institutional initiatives, not just in Asia but around the world. The other is that the Renminbi will play a regional role in Asia equivalent to that of the euro in greater Europe. Proponents of this view argue that China has a natural advantage in leveraging regional supply chains and deepening its links with other Asian countries as well as in developing regional institutions. Asia, they argue on these grounds, will become the natural habitat for the Renminbi.
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the external impact of china s exchange rate policy evidence from firm level data
National Bureau of Economic Research, 2011Co-Authors: Barry Eichengreen, Hui TongAbstract:We examine the impact of Renminbi revaluation on firm valuations, considering two surprise announcements of changes in China's exchange rate policy in 2005 and 2010 and data on 6,050 firms in 44 countries. Renminbi appreciation has a positive effect on firms exporting to China but little positive or even a negative impact on those providing inputs for China's processing exports. Stock prices rise for firms competing with China in their home market while falling for firms importing Chinese products with large imported-input content. Renminbi appreciation also reduces the valuation of financially-constrained firms, particularly in more financially integrated countries.
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the external impact of china s exchange rate policy evidence from firm level data
IMF Working Papers, 2011Co-Authors: Barry Eichengreen, Hui TongAbstract:We examine the impact of Renminbi revaluation on foreign firm valuations, considering two surprise announcements of changes in China’s exchange rate policy in 2005 and 2010 and employing data on some 6,000 firms in 44 economies. Stock returns rise with Renminbi revaluation expectations. This reaction appears to reflect a combination of improvements in general market sentiment and specific trade effects. Expected Renminbi appreciation has a positive effect on firms exporting to China but a negative impact on those providing inputs for the country’s processing exports. Stock prices rise for firms competing with China in their home market but fall for firms importing Chinese products with large imported-input content. There is also some evidence that expected Renminbi appreciation reduces the valuation of financially-constrained firms, presumably because appreciation implies reduced Chinese purchases of foreign securities. The results carry over when we consider ten instances of market-perceived changes in prospective Chinese currency policy.
Chang Shu - One of the best experts on this subject based on the ideXlab platform.
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Geographic spread of currency trading: the Renminbi and other EM currencies
2019Co-Authors: Yin-wong Cheung, Robert N Mccauley, Chang ShuAbstract:This paper studies the ongoing diffusion of Renminbi trading across the globe, the first such research of an international currency. It analyses the distribution in offshore Renminbi trading in 2013 and 2016, using comprehensive data from the Triennial Central Bank Survey of Foreign Exchange and Over-the-Counter Derivatives Market Activity. In 2013, Asian centres favoured by the policy of Renminbi internationalisation had big shares in global Renminbi trading. In the following three years, Renminbi trading seemed to converge to the spatial pattern of all currencies, with a half-life of seven to eight years. The previously most traded emerging market currency, the Mexican peso, shows a similar pattern, although it is converging to the global norm more slowly. Three other major emerging market currencies show a qualitatively similar evolution in the geography of their offshore trading. Overall the Renminbi's internationalisation is tracing an arc from the influence of administrative measures to the working of market forces.
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Recent Renminbi policy and currency co-movements
Journal of International Money and Finance, 2019Co-Authors: Robert N Mccauley, Chang ShuAbstract:This study investigates how variation in Chinese authorities’ Renminbi management since the August 2015 exchange rate reform maps onto variation in the co-movement between the Renminbi with regional and other emerging market currencies. We first identify three post-reform periods of RMB management: transition, basket management and countercyclical management. Across these periods, the reaction of the official “fixing” rate to market movements differed significantly. The co-movement with regional and Latin American currencies peaked in the basket period, when the management was most multilateral, making it possible to discern a Renminbi zone in this period. By contrast, the decline in co-movement in the countercyclical management period since May 2017 leaves it premature to speak of a Renminbi bloc. The dependence of the co-movements on Renminbi management has important implications for Renminbi internationalisation.
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Impact of the Renminbi Exchange Rate on Asian Currencies
Currency Internationalization: Global Experiences and Implications for the Renminbi, 2010Co-Authors: Chang ShuAbstract:With the growing importance of the Chinese economy, it is widely believed that China’s currency is having increasing impact on Asian currencies. Foreign exchange traders and analysts frequently attribute movements of Asian currencies to those of the Renminbi.1 A China dominance hypothesis has surfaced in academic research papers, suggesting that the sheer size of the Chinese economy will ensure that the Renminbi will gradually play a central role in the region, and may become an anchor currency in Asia (Colavecchio and Funke, 2007; Greenaway et al., 2006). The knock-on effects that the Renminbi can have on regional currencies have also been noted by policymakers worldwide. Yam (2007), for example, remarks that a large (stepwise) appreciation of the Renminbi against the US dollar would trigger substantial movements in the exchange rates of developing economies, particularly those in Asia.
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Renminbi as an International Currency: Potential and Policy Considerations
2009Co-Authors: Hongyi Chen, Wensheng Peng, Chang ShuAbstract:The potential of the Renminbi as an international currency is underpinned by the large and fast growing Chinese economy. We present empirical evidence indicating that the Renminbi has already become a significant force impacting the exchange rates of the Asian currencies. We also estimate a reserve currency model and counterfactual simulations, and suggest that the Renminbi's potential as a reserve currency would be comparable to that of the Japanese yen and the British pound if the Chinese currency were to become a fully convertible currency today. The evolution of the international role of the remninbi will depend importantly on the pace of the liberalisation of the restrictions on currency convertibility, which is likely to be governed by the authorities' consideration of the associated benefits and costs. In particular, we see a two-way reinforcement of currency internationalisation and financial market developments and opening in China.
Robert N Mccauley - One of the best experts on this subject based on the ideXlab platform.
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Geographic spread of currency trading: the Renminbi and other EM currencies
2019Co-Authors: Yin-wong Cheung, Robert N Mccauley, Chang ShuAbstract:This paper studies the ongoing diffusion of Renminbi trading across the globe, the first such research of an international currency. It analyses the distribution in offshore Renminbi trading in 2013 and 2016, using comprehensive data from the Triennial Central Bank Survey of Foreign Exchange and Over-the-Counter Derivatives Market Activity. In 2013, Asian centres favoured by the policy of Renminbi internationalisation had big shares in global Renminbi trading. In the following three years, Renminbi trading seemed to converge to the spatial pattern of all currencies, with a half-life of seven to eight years. The previously most traded emerging market currency, the Mexican peso, shows a similar pattern, although it is converging to the global norm more slowly. Three other major emerging market currencies show a qualitatively similar evolution in the geography of their offshore trading. Overall the Renminbi's internationalisation is tracing an arc from the influence of administrative measures to the working of market forces.
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Recent Renminbi policy and currency co-movements
Journal of International Money and Finance, 2019Co-Authors: Robert N Mccauley, Chang ShuAbstract:This study investigates how variation in Chinese authorities’ Renminbi management since the August 2015 exchange rate reform maps onto variation in the co-movement between the Renminbi with regional and other emerging market currencies. We first identify three post-reform periods of RMB management: transition, basket management and countercyclical management. Across these periods, the reaction of the official “fixing” rate to market movements differed significantly. The co-movement with regional and Latin American currencies peaked in the basket period, when the management was most multilateral, making it possible to discern a Renminbi zone in this period. By contrast, the decline in co-movement in the countercyclical management period since May 2017 leaves it premature to speak of a Renminbi bloc. The dependence of the co-movements on Renminbi management has important implications for Renminbi internationalisation.
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La gestion du Renminbi depuis 2005
Revue d'économie financière, 2011Co-Authors: Robert N MccauleyAbstract:Conventional wisdom is that the Renminbi exchange rate since mid 2005 has been no more than a simple (crawling) dollar peg. We instead interpret the Chinese authorities as having made the transition away from a crawl or stall against the US dollar or having at least conducted a sustained experiment in a basket management in the period of 2006-2008. The Chinese bilateral dollar exchange rate is not representative of the Renminbi management since 2005, the SDR is more representative, while the BIS effective index is the most representative of the three. As it happens, the euro/Renminbi rate was representative of the Renminbi?s broader movements between June 2005 and December 2010. Moreover, the nominal exchange rate is not the full story of the Chinese exchange rate policy. Since prices have risen faster in China than in its trading partners, the real rise of the Renminbi over the period June 2005 to December 2010 has been about 10% larger than its nominal rise. As it happens, the real rise against the euro was also representative of the Renminbi?s broader movements. Classification JEL: F31, O53, P33, P34.
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The evolving Renminbi regime and implications for Asian currency stability
SSRN Electronic Journal, 2010Co-Authors: Robert N MccauleyAbstract:The Chinese authorities described the management of the Renminbi after its 2005 unpegging from the US dollar as involving a basket of trading partner currencies. Outside analysts have detected few signs of such management. We find that, in the two years from mid-2006 to mid-2008, the Renminbi strengthened gradually against trading partners' currencies within a narrow band. In mid-2008, the financial crisis interrupted this experiment and the bilateral Renminbi/dollar exchange rate stabilised at 6.8. The 2006-08 experience suggests that a shared policy of gradual nominal effective appreciation renders East Asian currencies quite stable against one another. Such a shared policy would create favourable conditions for regional monetary cooperation.
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efficacy of china s capital controls evidence from price and flow data
Pacific Economic Review, 2008Co-Authors: Robert N MccauleyAbstract:The paper argues that China's capital controls remain substantially binding. This has allowed the Chinese authorities to retain some degree of short-term monetary autonomy, despite the fixed exchange rate to July 2005. Although the Chinese capital controls have not been watertight, we find sustained and significant gaps between onshore and offshore Renminbi interest rates and persistent dollar/Renminbi interest rate differentials during the period of a de facto dollar peg. While some cross-border flows do respond to market expectations and relative yields, they have not been large enough to equalise onshore and offshore Renminbi yields. Copyright 2008 The Authors Journal compilation 2008 Blackwell Publishing Ltd
Laurent L. Pauwels - One of the best experts on this subject based on the ideXlab platform.
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Do External Political Pressures Affect the Renminbi Exchange Rate
Journal of International Money and Finance, 2012Co-Authors: Li-gang Liu, Laurent L. PauwelsAbstract:This paper investigates whether external political pressure for faster Renminbi appreciation affects both the daily returns and the conditional volatility of the Renminbi central parity rate. We construct several political pressure indicators pertaining to the Renminbi exchange rate, with a special emphasis on the US pressure, to test the hypothesis. After controlling for Chinese macroeconomic surprise news, we find that US and non-US political pressure does not have a significant influence on Renminbi's daily returns. However, evidence suggests that political pressures, and especially those from the US, have statistically significant impacts on the conditional volatility of the Renminbi. Furthermore, we conduct the same exercise on the 12-month Renminbi non-deliverable forward rate. We find that the non-deliverable forward market is highly responsive to macroeconomic surprise news and there is some evidence that Sino-US bilateral meetings affect the conditional volatility of the Renminbi non-deliverable forward rate.
