'Flowers and criticism': The political economy of the renminbi debate PDF
Preview 'Flowers and criticism': The political economy of the renminbi debate
ReviewofInternationalPoliticalEconomy13:2May2006:233–257 ‘Flowers and criticism’: The political economy of the renminbi debate Paul Bowles and Baotai Wang1 EconomicsProgram,UniversityofNorthernBritishColumbia,Canada ABSTRACT Since2003Chinahasfacedincreasingpressure,especiallyfromtheUSand Japan,torevaluetherenminbi.InJuly2005Chinarespondedbyannounc- ingasmallrevaluationandaswitchfromadollarpegtoatightlymanaged floatagainstacurrencybasket.Themainstreameconomicdebate,whichwe brieflyreview,hasfocusedonwhether,andtowhatextent,therenminbiis undervalued.Fromapoliticaleconomyperspective,however,themoreinter- estingquestioniswhyChinahasbeensoreluctanttosignificantlyrevaluethe renminbiespeciallysinceitwaskeentoproveitselfa‘responsiblemember oftheinternationalcommunity’bynotdevaluinginthewakeoftheAsian financialcrisisin1997–1998.Wearguethatthiscanbeexplainedbythreefac- tors.Theseare,firstly,thediminishedabilityofChina’spolicy-makerstouse theexporttaxrebatepolicytomitigatetheeffectsofarevaluation.Secondly, therearedifferencesintheregionalcontextbetweenthetwotimeperiods. Thirdly,intheinternationalgameof‘problemassignment’,Chinarefusesto acceptthattheUStradedeficitisits‘problem’. KEYWORDS Exchangerates;renminbi;China;internationaladjustment I. INTRODUCTION Duringthe1997Asianfinancialcrisis,Chinastooduptopressurefor keepingtheRenminbi(RMB)fromdevaluing,andthuswonpraises from various countries around the world. In 2003, China is faced withinternationalpressuredemandingtheappreciationoftheRMB (People’sCurrency),whichisasstrongasthepreviousoneandeven more difficult to resist. The present difference is: there are no more freshflowersandapplause,Chinahasbecometheobjectofcriticisms fromtheUnitedStatesandJapan.(People’sDaily,23July2003) ReviewofInternationalPoliticalEconomy ISSN0969-2290print/ISSN1466-4526online(cid:1)C 2006Taylor&Francis http://www.tandf.co.uk DOI:10.1080/09692290600625488 REVIEW OF INTERNATIONAL POLITICAL ECONOMY During 2003 and 2004 the clamour accusing China of ‘manipulating’ the renminbi-dollar exchange rate reached a crescendo. Seen against a back- drop of a huge US balance of trade deficit and an electoral year in the USwith‘outsourcing’amajordebatingpoint,thisisperhapsnotsurpris- ing.Economicstudieshavesoughttomeasurewhether,andtheextentto which,therenminbiisundervalued.Perhapsagainunsurprisingly,awide varietyofestimatescanbefoundaswedocumentinSectionIlater.Inthe USSenate,legislationwasproposedthatwouldhaveplaceda27.5%tar- iff on Chinese imports to offset China’s alleged ‘manipulation’; the tariff ratebeingtheaverageofthreeestimatesoftheundervaluationoftheren- minbiofferedtoacongressionalcommittee.(Eichengreen,2004).TheG-7, towhichChinaisnowaninvitedguest,hasalsouseditsmeetingstovoice itsconcernoverChina’sexchangeratepolicies.Post-electiondebateinthe United States has continued unabated with the US Treasury reporting in May2005thatwithouta‘substantialalteration’intrends,China’spolicies wouldsoonmeetthecriteriaforclassificationasa‘currencymanipulator’ undertheUSOmnibusTradeandCompetitivenessActof1988. Faced with this pressure, China held firm, highlighted international (mainly United States) economists who supported the fixed rate, before eventually agreeing to a joint statement with the United States in late September 2004 which indicated China’s intention to introduce a flexi- bleexchangeratesystem(seeNewYorkTimesOctober12004).2 Chinadid not, however, indicate a date by which this intention might be realized. Indeed,shortlyaftertheannouncementLiRuogu,deputygovernorofthe People’sBank,reportedlyremarkedthat‘Chinahasan8,000-yearhistory ...Adecadeistrulyashortperiod’(TheEconomist,October42004).Nev- ertheless,ChinadidsuddenlyannounceinJuly2005thatitwouldchange itsexchangeratepolicy.Thischangeresultedinasmallrevaluationofthe renminbiagainsttheUSdollarof2%andaswitchfromafixedrateagainst theUSdollartoatightlymanagedfloatagainstabasketofcurrencies.3 The‘debate’overtheappropriateleveloftherenminbi-dollarexchange raises an interesting political economy question, namely, why did China maintain its de facto dollar peg in the Asian crisis in 1997–1998 in order towininternationalsupportbuthasstoodfirminthefaceofinternational pressuretorevaluesince2003withonlyamodestrevaluationoccurringin 2005?Inshort,whydidChinaplaytheroleof‘responsible’memberofthe internationalcommunityin1997–1998butrefusetomoveinthefaceoflater internationalcriticism?WearguethatChina’sreluctancetorevaluedespite the strength of international pressure to do so can be explained by three factors.ThefirstisthatChina’sexport-taxrebatepolicyhaslostmuchofits abilitytobeusedasapolicytooltomitigatetheimpactsofarevaluation. Secondly, the regional context has changed enabling China to maintain regionalsupportandmaintainitsexchangerateregime.Thirdly,weargue thatintheinternationalgameof‘problemassignment’,Chinahasrefused 234 BOWLES AND WANG: FLOWERS AND CRITICISM to accept that the US trade deficit is its problem. This latter factor sheds lightonhowadjustmentstakeplaceintheinternationalpoliticaleconomy andwhichcountriesbeartheburdensoftheseadjustments.Itexposesthe tensionswithintheinternationalsystembetweentheUnitedStates,unique in its ability to ‘burden shift’ because of the role that the dollar plays as an international currency, and an increasingly powerful China following developmentalist policies. Each of these three factors is discussed in the sectionswhichfollowthebriefreviewoftheconventionaldebate. II. IS THE RENMINBI UNDERVALUED? A BRIEF REVIEW OF THE CONVENTIONAL DEBATE Thetrendswhichhavepropelledthevalueoftherenminbitotheforefront of discussions on international monetary arrangements are summarized inTables1–3.TheyshowtheUStradebalanceswiththeChinaandwith the rest of the world, the dollar/renminbi exchange rate and the level of China’sinternationalreserves. Whilethereisagreementonmostofthesetrends,thereislessagreement onwhattheirimplicationsare.4Thequestionwhichhasattractedthemost attentioniniswhethertherenminbiisundervaluedandwhetheranysuch undervaluation is the result of currency ‘manipulation’ and therefore in violationofIMFrules. Table 1 US Current Account Balance and Balance ofTradewithChina1990–2004(US$billions) Current Tradedeficit Year accounta withChinab 1990 −78.97 −10.4 1991 3.75 −12.7 1992 −48.01 −18.3 1993 −81.99 −22.8 1994 −117.68 −29.5 1995 −105.22 −33.8 1996 −117.20 −39.5 1997 −135.98 −49.7 1998 −209.56 −56.9 1999 −296.82 −68.7 2000 −413.45 −83.8 2001 −385.70 −83.1 2002 −473.94 −103.1 2003 −530.67 −124.1 2004 −631.27 −147.7 Source: aInternational Monetary Fund, World Economic OutlookDatabase,September2004. bUS Census Bureau, http://www.census.gov/foreign trade/balance/c5700.html#questions. 235 REVIEW OF INTERNATIONAL POLITICAL ECONOMY Table2 Renminbi/USdollarexchangerate1990–2004 Year RenminbiperUSdollar 1990a 5.2220 1991a 5.4340 1992a 5.7158 1993a 5.8000 1994 8.4462 1995 8.3174 1996 8.2982 1997 8.2798 1998 8.2787 1999 8.2795 2000 8.2774 2001 8.2768 2002 8.2773 2003 8.2767 2004b 8.2765 Source: Statistical Yearbook for Asia and the Pacific, United Nations. aDuringthisperiod,therewasanofficialexchangerateanda swapmarketrate.Theexchangerateshownhereistheofficial rate.Fordetailsofthegapbetweentheofficialandthemarket rateseeLinandSchramm(2003). bEnd of year rate. See http://www.pbc.gov.cn/diaocha- tongji/tongjishuju/gofile.asp?file=2004S5.htm. Table3 China’sinternationalreserves1990–2004(US$billions) Year Foreignexchangereserves 1990 28.594 1991 42.664 1992 19.443 1993 21.299 1994 51.620 1995 73.579 1996 105.029 1997 139.890 1998 144.959 1999 154.675 2000 165.574 2001 212.165 2002 286.407 2003 403.251 2004a 609.932 Source:IMF,InternationalFinancialStatistics. aDatafromthePeople’sBankofChina.Seehttp://www.pbc.gov.cn/ diaochatongji/tongjishuju/gofile.asp?file=2004S5.htm. 236 BOWLES AND WANG: FLOWERS AND CRITICISM This debate has been carried out mostly by economists and policy- makers in the United States and in China. It has been a debate which hasnotbeenrestrictedtoacademicpapersbuthasalsobeenprominentin theop-edpagesofthe‘respectable’pressintheUnitedStatesaswellason thefrontpagesoftheofficialnewspapersinChina. To start with the main question, estimating whether the renminbi is undervalued or not is a complicated and contested exercise and a range of answers has been given. This reflects not only a number of different methodologiesbeingemployedbutalsoatheoreticalissueofwhatconsti- tutes an ‘equilibrium exchange rate’ in an economy with pervasive capi- talcontrols.If,forexample,therenminbiiscalculatedtobeundervalued at present, would this still be the case if capital controls were removed? Wouldcapitaloutflowsthenensuewhichexceedcurrentcapitalinflows? Ifthiswasthecase,thenanypresentundervaluationcouldbearguedto be‘temporary’ratherthan‘fundamental’.Differencesintheassessmentof renminbi‘undervaluation’dependinpart,therefore,ondifferingassess- mentsoftemporaryandfundamentalfactors. As an example of the current debate, consider Goldstein and Lardy (2003a,b)whoarguethattherenminbiisbetween15and25%undervalued. ThisestimatewasrepeatedintestimonybyGoldstein(2003)inCongres- sional hearings. This figure was obtained in two ways, both described byGoldstein(2004:3)as‘back-of-the-envelope’estimates.Thefirstwasby ‘solvingatrademodelfortheappreciationoftheRMBthatwouldproduce equilibriuminChina’soverallbalanceofpayments’whilethesecondwas arathervaguerapproachwhichsoughttomeasure‘theappreciationofthe RMBthatwouldmakeafaircontributiontothereductioninglobalpay- mentimbalances,especiallythereductionoftheUScurrentaccountdeficit toamore‘sustainable’level’.Bothapproachessupportedthe15–25%un- dervaluationestimate.However,asGoldstein(2004:16)makesclear,this estimatedependscriticallyontheassumptionthatcapitalcontrolsarekept inplace. Goldstein(2004)furtherarguesthatthisundervaluationrepresents‘ma- nipulation’andhencecontrarytoIMFrules.WhileChina’sreserveshave beenincreasingforadecade,theincreaseinreservessince2002suggestto GoldsteinthatChinahasbeeninterveningintheforeignexchangemarket tomaintain—‘manipulate’—thevalueoftherenminbiatanundervalued rate(2004:18). Otherapproaches,usingpurchasingpowerparity(PPP)measures,have reached contradictory conclusions.5 Thus, Frankel (2004) concludes that theyuanwasundervaluedbyaround35%in2000.Preeg(2003:270)esti- matesanundervaluation‘probablyontheorderof40%’.Incontrast,Yang andBajeux-Besnainou(2004),alsousingPPPmeasures,concludethatthere isnoconvincingevidenceofundervaluationoftherenminbi.6 237 REVIEW OF INTERNATIONAL POLITICAL ECONOMY WhileGoldstein(2004:18)citesChinaforeignexchangereservesbuild up as evidence of ‘currency manipulation’, Yang and Bajeux-Besnainou (2004:19)attributetheincreaseininternationalreservestocapitalinflows resulting from ‘a few key non-market driven factors (such as control on capitaloutflowsandpreferentialtreatmentofforeigninvestment)’rather thanasasignofcurrencymanipulation. Empiricalstudieshavebeensupplementedbycommentsbyanumber ofprominenteconomistswhohavearguedthattherenminbiisnotunder- valued.Forexample,USeconomistsMcKinnonandMundellhaveargued thattherenminbiisnotundervaluedandthatChinashouldnotchangeits exchangeratepegtothedollar.McKinnonarguesthatthelevelofrenminbi reflectsChina’sfundamentalsandthattheproblemoftheUScurrentac- count deficit has much more to do with the US policies than with China (seeChinaDaily,31May2004).Inadifferentvein,forStiglitzitistheinsta- bility of global financial markets that makes floating the exchange rate a potentiallydestabilizingforceforboththeChineseandglobaleconomies. The views of McKinnon, Mundell and Stiglitz as well as private sec- tor economists such as Stephen Roach (chief economist at Morgan Stan- ley),FredWu(atGoldmanSachsAsia)GerardLyons(atStandardCharter Bank)allofwhomhave,atsomepointoverthe2003–2004period,defended China’s exchange rate peg were prominently reported in the Chinese press to bolster the official position. Chinese economists have typically favouredtheofficialpositionarguingthattheRMBisnotover-valued.Al- thoughtherehasbeenonlyasmallnominalappreciationoftherenminbi against the US dollar over the past ten years, Yang et al. (2003) among others,noteamuchlargerrealeffectiveappreciationtojustifythisnoun- dervaluationconclusion.7 TheWesternopponentsofachangeinthevalueoftherenminbiorofex- changerateregimehavetendedtofocusontheproblemsthatsuchchanges wouldbringtotheChineseeconomyintermsofpotentialexchangerate volatilityandafallinemploymentgrowth.8Incontrast,althoughmuchof theresearchdonebyproponentsofachangeintheexchangerateand/or the exchange rate regime is stimulated by an interest in the fairness of China’s policies, most continue by stressing that a change in the present systemisinChina’sbestinterests. A second question in the debate, therefore, has been, regardless of whether the renminbi is undervalued at present, what type of exchange ratesystemshouldChinahaveoverthelongerterm? HereGoldsteinandLardy(2003b)argueforatwo-stepprocessformov- ing to a managed float which would benefit China and her trading part- ners.9 Their argument that exchange rate flexibility should precede capi- talaccountliberalizationisalsosupportedbyPrasadetal.(2005).Frankel (2004)arguesthatChina’sundervaluationiscausingdomesticinflationary pressuresandafurtherbuildupoflowinterestbearingreservesisneither 238 BOWLES AND WANG: FLOWERS AND CRITICISM desirable nor necessary for China. An appreciation would ease the infla- tionarypressuresalthoughFrankeltoosupportssomekindofintermediate exchangerateregimesuchasatargetzone.Thistypeofintermediateex- change rate approach is also supported by Williamson, Feng and Willett (n.d.).10 AsWillettpointsout,thesewritersallarguethatthereareagood many possibilities between the status quo and the rapid move to a float andcapitalaccountliberalizationwhichUSTreasurySecretaryJohnSnow andotherG-7officialshaveurgedChinatoadopt. TheextenttowhichanyrevaluationwouldeasetheUStradedeficitalso remainsanissueindispute.Ingeneral,theprospectsforalargereduction inthebilateralUnitedStates–Chinatradedeficitfromarevaluationofthe renminbi are held in check by factors such as the high import content of ChinesemanufacturedexportsandthehighproportionofChinesemanu- facturedexportersaccountedforbymultinationalcompanies(seeBottelier, 2004:22–23,andTheEconomist2005).11 Furthermore,theimpactofaren- minbirevaluationontheoverallUStradedeficitislikelytobeminimized by the fact that the United States no longer produces many of the goods whichitimportsfromChinaandthereforewillhavetoturntohighercost suppliers. Thisreviewhashighlightedtherangeofmethodologiesusedandesti- matesmadeoftheextentoftherenminbi’sundervaluation.Thereviewhas alsohighlightedthewiderangeofviewsoverwhereChinashouldgofrom here.Implicitinalmostofallofthediscussionisthatweknowwhere‘here’ is, namely, a fixed nominal rate against the US dollar (rigidly so at least untilJuly2005).Inthenextsection,weprovideabriefhistoryofChina’s exchange rate policies since 1978 and suggest that there is, in fact, more uncertainty about where ‘here’ is than has been evident in much of the debatesurveyedearlier.ThisarisesbecauseoftheflexibilitywhichChina hasretainedinexchangeratepolicybythecontinuinguseofexporttaxre- bates.Theserebatesindicatethecontinuingrelevanceofdevelopmentalist objectivesinChinesepolicybuttheirbudgetaryimplicationsalsoprovide us with one part of the explanation of why China did not devalue dur- ingtheAsianfinancialcrisisbuthasresistedthepressurestosubstantially revaluesince2003.Theexporttaxrebateandtheunconventionalnatureof China’spegarediscussedinthenextsection. III. CHINA’S UNCONVENTIONAL DOLLAR PEG, DEVELOPMENTALISM AND EXPORT TAX REBATES TheusualinterpretationofChina’sexchangeratepolicyisthatduringthe 1980s a dual exchange rate system operated followed by exchange rate unification in 1994 and a fixed exchange rate against the US dollar from 1995onwards.Therewasthereforeachangeinexchangerateregimeinthe mid-1990s.ThiscanreadilybeseenfromTable2. 239 REVIEW OF INTERNATIONAL POLITICAL ECONOMY Theperiodsince1995hasprovidedastartingpointforthecurrentren- minbi debate, namely, a fixed rate against the US dollar.12 It should also benotedthatthisisnominalpeg;giventhehigherinflationratesinChina than in the United States since 1995 there has been a real appreciation of the renminbi of around 20% (although the choice of base year affects the sign and size of this measure (see Bottelier 2004). But, this aside, is it accurate to classify China’s exchange rate regime as a ‘conventional peg’andwasthereadiscretechangeinpolicyinthemid-1990sasTable2 suggests? In this section, we argue that in fact China’s exchange rate regime is more complicated than at first appears and that in both the pre- and post-1995periodsthereisanelementofcontinuityinthedevelopmental- ist/productivistapproach that has been taken. The continuity in China’s exchangeratepolicies,theregimechangeinTable2notwithstanding,arises becauseoftheuseofVATrebatesforexporters.Thishasimportantimpli- cations for explaining China’s policies towards devaluation in 1997 and revaluation in 2003 as well as for understanding the differences in the interestsoftheUnitedStatesandChinaarisingfromdifferencesindevel- opmentalstatus.Thesetwoimplicationsarecriticaltoapoliticaleconomy analysisoftherenminbidebatealthoughtheyaretypicallyignoredinthe conventionaleconomicapproaches. AbriefhistoryofChina’sexchangeratepoliciessince1978isnecessary.13 In1981Chinaadoptedaquasi-dualexchangeratesystem.Underthissys- tem,theofficialrateof1.5RMB/US$wasusedforalltransactionscarried outwiththeBankofChinabyallChineseandforeigncompanieswiththe exceptionofthoseChinesecompaniesengagedinforeigntrade.Forthese lattercompanies,anInternalSettlementRateof2.8RMB/US$wasused. AsChinare-enteredtheworldmarket,alowerexchangerateforexporters wasneedtostimulateexportsandcorrectfortheovervaluationwhichhad occurred in the years of central planning. The official exchange rate was gradually devalued over the following four years. However, this system was abandoned in 1985 after pressure from the IMF which regarded the InternalSettlementRateasadefactodualexchangeratesystembutwhich it,theIMF,hadnotsanctioned. In 1985 China introduced, this time with IMF approval, a foreign cur- rency swap market (administered by the Foreign Exchange Adjustment Centres)whichservedasadefactodualexchangerateregime.Theroleof theswapmarketwastoactasaclearinghouseforenterpriseswithexcess demandfor,orsupplyof,foreignexchangewheretheexchangeratewas determined(moreorless)bymarketforces.Asenterpriseswereincreas- inglyallowedtoretainapercentageoftheirforeignexchangeearnings,the swapmarketsbecameincreasinglyimportant.Between1985and1993,the swapmarketsexpandedinnumberandinsizeasforeignexchangereten- tionrateswereincreasedandmoreenterpriseswerepermittedtousethe 240 BOWLES AND WANG: FLOWERS AND CRITICISM swapcentres.Thebandswithinwhichcurrencytradingwasallowedwere widenedandfinally,moreorless,abandoned.By1993,theswapmarket was handling approximately 80% of China’s foreign trade transactions. Theexchangeratesetintheswapmarketwasmuchlowerthantheofficial rate.Thelatterwasdevaluedfourtimesbetween1985and1990asaresult. Thedualexchangeratesystemeffectivelysecuredadevaluationforex- portersbutonewhichwasdifferentiallyappliedbecauseofsectoralvari- ationsinforeignexchangeretentionrates.Thus,someexporterswereable to take much greater advantage of the implicit devaluation than others becauseofthedifferentialretentionrates.Asageneralrule,thosesectors suchasmanufacturingwhichhadthehighestforeignexchangeretention rates enjoyed the fastest rates of export growth (see Boke, 1996: 78). It is perhaps more accurate to describe China’s foreign exchange rate policy duringthisperiodasoneofmultipleexchangerates.14 In 1994, the exchange rate was unified with the official rate being de- valuedinlinewiththemarket-basedswaprate.Theretentionsystemwas abolishedatthesametime.Thispolicychangeoccurredasthegapbetween the swap rate and the official rate became increasingly large. China had enteredanewcycleofreforminlate1992asaresultofDengXiaoping’s southern tour and unification of the exchange rate was a part of this re- formcycle.Whiletheunificationoftheexchangeratemarksaclearpolicy change,itwasaccompaniedbyamovetowardstheadoptionofadefacto dollar peg. This did not happen immediately and, in fact, the renminbi appreciatedslightlyin1994beforetheimplicitpegtookover. Itisimportanttorealizethattheunificationoftheexchangerateandthe abolitionofthedifferentialforeignexchangeretentionsystemdidnotmark the end of the broader developmentalist approach. Rather, it continued in the form of differential and variable VAT rebates for exporters. The tax rebate system has been noted by several authors as an alternative to exchangeratechangesinthecurrentdebate.However,asystematicaccount ofitsoperationovertimeisrequiredtofullyappreciateitsimportance.15 Chinaintroducedapolicyofexport-taxrebatesin1985.Thepolicywas basedonreturningtoexportersofspecifiedgoodsanamountequaltothe sum of the value-added tax and the consumption tax which were levied beforeexporting,sothatexportsweretax-free.Thisis,ofcourse,anexport promotion policy although one which does not contravene international trade rules since it is based on tax rebates on inputs used by exporters ratheronthandirectexportsubsidies. The export-tax rebate policy has two main phases, the first from 1985 to 1993 and the second after 1994. During the first phase, the tax rebate appliedonlytoalimitednumberofcommodities,andthetotalamountof therebatewasrelativelymodest.In1985itamountedtoRMB1.98billion and the accumulated rebate during the nine years of the first phase was approximatelyRMB138.8billion.Duringthisperiod,theforeignexchange 241 REVIEW OF INTERNATIONAL POLITICAL ECONOMY Table4 Totalexport-taxrebates(RMBbillions) 1994–2004 Year Totalrebate 1994 45.02 1995 54.87 1996 82.77 1997 43.27 1998 43.63 1999 62.71 2000 81.00 2001 107.15 2002 125.94 2003 203.90 2004 219.59 Source: State Administration of Taxation website http://www.chinatax.gov.cn/data.jsp. swap centres were also in operation and there were multiple exchange rates,asexplainedearlier. However, when the exchange rate was unified in 1994, the export-tax rebatesystemwasgreatlyexpandedtoensurethatexporterscontinuedto receivepreferentialtreatment.In1994,theexport-taxrebatewassetat17% (13%foragriculturegoods)thesamerateasthevalueaddedtax.Thetotal rebateinthisoneyearwasRMB45billionasshowninTable4. During this second phase, the export-tax rebate has been varied— upwardsanddownwards—inresponsetoChina’schangingexternalen- vironment.Ineffect,therigidityofafixednominalexchangeratehasbeen partiallycircumventedbyflexibilityintheapplicationoftheexport-taxre- batesystem.Forexample,in1995,theexporttaxrebateratewasadjusted downwardstwice.Therateforagriculturalgoodswasreducedto3%,while the rates for manufactured goods which used agricultural raw materials wasreducedfrom13%to10%andformanufacturedgoodswhichdidnot useagriculturalinputswasreducedfrom17%to14%.In1996,thetaxre- bateratewasadjusteddownwardsagain.However,becauseof‘taxinertia’ these reductions in the rebate rate were not immediately reflected in the totalamountoftherebatepaidoutanditreachedRMB82.8billionin1996. Theeffectsofthetaxrebateratereductionswerereflectedmoreclearlyin thefallingtotalrebatesfor1997and1998. The export tax rebate therefore enabled China to preserve some im- plicit exchange rate flexibility as part of a broader developmental- ist/productivistpolicyframework.16 Thisflexibilitywastoproveimpor- tant in enabling China to respond to the Asian financial crisis without a formal devaluation of the renminbi. Instead, China reversed the down- wardtrendoftheexport-taxrebaterate.In1998,exportgrowthratefellto 242
Description:The list of books you might like
