Resumen de "Flowers and criticism": The political economy of the renminbi debate

Paul Bowles, Baotai Wang

• Since 2003 China has faced increasing pressure, especially from the US and Japan, to revalue the renminbi. In July 2005 China responded by announcing a small revaluation and a switch from a dollar peg to a tightly managed float against a currency basket. The mainstream economic debate, which we briefly review, has focused on whether, and to what extent, the renminbi is undervalued. From a political economy perspective, however, the more interesting question is why China has been so reluctant to significantly revalue the renminbi especially since it was keen to prove itself a ‘responsible member of the international community’ by not devaluing in the wake of the Asian financial crisis in 1997–1998. We argue that this can be explained by three factors. These are, firstly, the diminished ability of China's policy-makers to use the export tax rebate policy to mitigate the effects of a revaluation. Secondly, there are differences in the regional context between the two time periods. Thirdly, in the international game of ‘problem assignment’, China refuses to accept that the US trade deficit is its ‘problem’.