Considering Chinese economy facing difficulty of price instability and currency management, and appreciation pressure on the yuan from developed countries in-cluding United State, the yuan to dollar exchange rate is expected to decrease (rise of the yuan’s valuation against U.S. dollar) approximately 7 percent for next one year. Although China needs to let the yuan appreciate, Chinese government will slowly lead yuan revaluation over the long term in order to alleviate the adverse impact on Chinese economy which is based on its price competitiveness with cheap goods.
Moreover, won-dollar exchange rate is expected to decline nearly 4 percent dur-ing the same period due to the yuan appreciation along with current account sur-plus and surging foreign securities investment in South Korea. Therefore, won-yuan rate will rise about 3 percent. When yuan to dollar rate is revalued by 7 percent, it is estimated around 2.2 percent decrease in Chinese export toward the world. In this case, there are 1.7 percent decrease in export from Korea to China and 0.9 percent rise in export to the other countries. Therefore, besides 0.2 percent of Korea’s export to be increased, the estimate is 0.17 percent point increase in real GDP of Korea. It means that the revaluation of yuan will not have big effect on Korean economy in the short term.
In terms of export, considering Korea’s goods against rival Japan’s one, the ex-change rate between won and yen should be stabilized in the mid to long term by adjusting the pace of Korean won revaluation to Japanese yen. When the yuan ap-preciation continues gradually in the long term, against the advance of Chinese in-dustry structure by possessing essential and core technology, Korea should relocate its industry structure to the top of global value chain in the near future. Further-more, in preparation for Chinese government’s policy aimed at spurring its domes-tic demand, Korea should raise export portion of final good as well as intermediate good. Besides, Korea should actively try to attract capital flowing out of China in order to boost regional economy.
Moreover, won-dollar exchange rate is expected to decline nearly 4 percent dur-ing the same period due to the yuan appreciation along with current account sur-plus and surging foreign securities investment in South Korea. Therefore, won-yuan rate will rise about 3 percent. When yuan to dollar rate is revalued by 7 percent, it is estimated around 2.2 percent decrease in Chinese export toward the world. In this case, there are 1.7 percent decrease in export from Korea to China and 0.9 percent rise in export to the other countries. Therefore, besides 0.2 percent of Korea’s export to be increased, the estimate is 0.17 percent point increase in real GDP of Korea. It means that the revaluation of yuan will not have big effect on Korean economy in the short term.
In terms of export, considering Korea’s goods against rival Japan’s one, the ex-change rate between won and yen should be stabilized in the mid to long term by adjusting the pace of Korean won revaluation to Japanese yen. When the yuan ap-preciation continues gradually in the long term, against the advance of Chinese in-dustry structure by possessing essential and core technology, Korea should relocate its industry structure to the top of global value chain in the near future. Further-more, in preparation for Chinese government’s policy aimed at spurring its domes-tic demand, Korea should raise export portion of final good as well as intermediate good. Besides, Korea should actively try to attract capital flowing out of China in order to boost regional economy.