How Changes in the Value of the
Chinese Currency Affect U.S. Imports
July 2008
Preface
This Congressional Budget Office (CBO) paper discusses factors that would limit the benefit to U.S. manufacturers from a potential appreciation of the Chinese currency. In keeping with CBO’s mandate to provide objective, nonpartisan analysis, the report makes no recommendations.
Bruce Arnold of CBO’s Microeconomic Studies Division wrote the paper under the supervision of Joseph Kile and David Moore. Inside CBO, William Randolph provided valuable guidance at several points in the development of the project, and David Brauer, Justin Falk, Juann Hung, Jonathan Huntley, and Mark Lasky reviewed various drafts. Outside CBO, Judith Dean, Michael Ferrantino, and Zhi Wang, staff of the U.S. International Trade Commission, and Morris Goldstein at the Peterson Institute for International Economics provided comments. (The assistance of external reviewers implies no responsibility for the final product, which rests solely with CBO.)
Leah Mazade edited the paper, and Sherry Snyder proofread it. Maureen Costantino designed the cover and prepared the paper for publication. Lenny Skutnik printed copies of the paper, Linda Schimmel handled the print distribution, and Simone Thomas produced the electronic version for CBO’s Web site.
Contents
Recent Movements in China’s Currency and in the Prices of U.S. Imports
What Is the Domestic Value Added of Chinese Exports?
Determining Domestic Value Added
Changes Over Time in Domestic Value Added
Methodology and Data for CBO’s Analysis
CBO’s Results and Their Implications
Comparison with Other Estimates
1. Percentage of Foreign-Sourced Intermediate Inputs in Chinese Exports, by Source Country
2. Estimates of Domestic Value Added of Chinese Exports
3. Largest Increases in Market Shares of Chinese Imports and Changes in Market Shares of Imports from the Rest of the World, 1998 Through 2005
1. Renminbi/Dollar Exchange Rates and Dollar Prices of U.S. Imports from China
