【正文】 外文 原文 The Chinese RMB: Its Value, Its Peg, and Its Future TRADE IMBALANCES HAVE MORE TO DO WITH THE . THAN WITH CHINA The valuation of the Chinese renminbi (RMB) has drawn lots of attention lately and a great deal of pressure on the part of developed nations for revaluation. In addressing the issue of valuation, this paper develops a new purchasing power parity (PPP) index of China’s exchange rate and finds that the while undervalued, the undervaluation is neither unusual nor bad policy. Moreover, China’s overall external trade balance does not seem to be that far out of equilibrium. China’s desire to join the G7 club is likely to result in abandoning its peg, however, despite the increased risk to its economic development. The valuation of the Chinese renminbi (RMB) has drawn lots of attention lately. The IMF, . government, and the G7 finance ministers are urging China to revalue its currency,which is currently pegged at to the arguments for China to appreciate its currency roughly follow these lines: ? China’s currency is grossly undervalued。 ? the undervalued RMB is attracting a flood of hot money into China, plicating the authorities’ efforts to engineer a softlanding for an overheated economy。 and ? the RMB’s undervaluation and its peg to the dollar are preventing other Asian countries from allowing currencies to rise against the dollar, since appreciation would damage petiveness relative to China. This last point is of particular concern because, it is argued , . external imbalances cannot be addressed in the face of China’s and other Asian nations’ historically unprecedented accumulations of . dollar reserves in recent years .There have been many studies on the RMB’s valuation with inconclusive, contradictory results (see, .,Wang, 2020). To address that difficult valuation question, this paper develops a new absolute PPP index that measures China’s PPP against the United States and other countries. The new index shows the RMB to be substantially undervalued in the context of “conventional wisdom.” However, the undervaluation is not unusual, given China’s level of economic development。 and conventional wisdom does not apply to China, because by any measure it is an undeveloped nation for which a currency peg is useful to maintain domestic economic and political stability (Prasad et al., 2020). In terms of multilateral external balances, we find it hard to argue that China’s currency is contributing much to its trade and balance of payment surpluses, especially if one takes the 1997 perspective when the RMB was under tremendous depreciation pressure. Indeed, there is clear evidence that if China’s trade balance was evenly distributed among its trading partners, there would be hardly any pressure for China to appreciate its currency. Thus, the pressure is political and structural in nature, originating from the large and growing multilateral trade imbalance of the United States. Unfortunately, it is much easier to blame China than to attack the underlying structural causes of the . trade deficit. We conclude that the political pressure on China to abandon the RMB’s peg to the dollar is likely to persist, and—as the most important growth market in the world today—China is more likely to move sooner rather than later to demonstrate that, in spite of the risks to its fragile financial system, it will share its global responsibilities as it eventually joins the G7. The paper wraps up by placing the exchange issue in the broader context and discussing the longerterm prospects of the RMB. Is the RMB Undervalued? The RMB is undervalued in the conventional sense that there is too much demand for it relative to the supply .Fundamentally, demand for foreign currency es from three sources: ? to buy goods or services, ? to invest in physical or financial assets, and ? to speculate on moves of the exchange rate itself. With a closed capital account, China’s currency is largely, but not entirely, immune from currency speculators and shortterm portfolio investors. Recent studies at the China National Economic Research Institute (2020) indicate that much of the socalled “hot money” inflows are not