Report Archive - China

  • China's Forex Reserves Hit a Historic High
    Do Rising Reserves Imply that the RMB Is Undervalued?
  • 11-Nov-2009

  • China’s foreign exchange reserves reached a record high of $ 2.27 trillion in Q3 2009, equivalent to about 50% of the country’s GDP, prompting questions about currency undervaluation. By examining historical data on China’s forex reserves, balance of payments, exports, and RMB/USD exchange rates, our analyses shed light on the major sources of the build-up in reserves, the high correlation between annual increases in BoP surpluses and forex reserves, and the major drivers of BoP surpluses. Further, using a relative purchasing power parity approach, our results indicate that the RMB is currently undervalued by about 4%.

  • Regions: China
  • Authors: Radhika Kamath
  • Products: Datastream
  • Keywords: currency, foreign exchange
  • Download full report pdf_small

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