Real Effective Exchange Rates vs Market Rates: the RMB (Chinese yuan)

Mike Smitka, Washington and Lee University

Here's a chart I created for my China's Modern Economy class showing the appreciation of the Chinese RMB / yuan [人民币·元] relative to the rest of the world. I put in the US$/yuan rate, inverted so that higher means stronger. But the core series is the monthly real effective exchange rate from the Bank for International Settlements. This the average value of the yuan with the exchange rates of the world's 61 largest countries, weighted by the amount of trade China conducts with each. In addition, the BIS corrects for inflation in each country, because if for example there's deflation in Japan, then at the same exchange rate US$1.00 buys more goods and services. Again, higher means stronger. At the bottom I append the most recently available (2013) trade data from the China Statistical Yearbook, to highlight the need to view China through lens with a wider perspective than the US bilateral relationship.

China's One-child Policy: redundant and now go

Mike Smitka, Prof of Economics, Washington and Lee

Here I discuss the end of China's one-child policy. In my weekly WREL economics segment I also discussed , the auto industry in China, Yellen and the Donald and interest rates, and gave an update on the United Way of Rockbridge. I provide only a paragraph one each at the end.

This past week China announced the end of its policy that limited most families to one child. Now it never was a strict limit, rural residents could have a second child if the first was a girl, and minorities were exempt altogether. But when it was first implemented in 1980, most women still wanted more than the permitted number, and the policy was draconian, indeed horrific, with women dragged away to undergo forced abortions and (slightly less horrific) forced sterilizations. For a decade, though, it's been irrelevant, as Chinese women are no longer farmer's wives who marry early and view multiple children as an inexpensive source of labor. Now urban women see children as an interruption to earning money, and costly to raise and educate.