Discussions on how best to exit from global imbalances to create a more balanced world
economy have ignored the impact on poor countries of proposals to redress these imbalances.
This paper aims at filling that gap. It gauges the degree of renminbi (RMB) undervaluation;
presents evidence on RMB undervaluation and China’s GDP growth rate; surveys the role of the
real effective exchange rate – both its level and its stability over time – for underpinning growth
in developing countries, especially in large dual economies such as China and India; finally, the
paper presents new evidence on growth linkages between China and poor countries for the last
two decades and surveys literature on potential displacement effects of RMB appreciation. The
analysis allows broad conclusions to be drawn about the potential developing-country
beneficiaries and losers from various renminbi adjustment scenarios in the forthcoming years.
