RMB Appreciation, Economic Growth and Income Distribution in China and the World

With a significant slowing down in economic growth especially in the growth rate of exports since the beginning of the 2010s when the appreciation of Renminbi (RMB) appreciation accelerates, China also faces a challenge of improving the already deteriorated income distribution. This raises a concern over the issue on how to stimulate domestic demand when export growth rate is slowing down and reduce inequality in income distribution when the RMB has to be appreciated. Based on a simple two sector theoretical framework, this paper examines the relationship between RMB appreciation, economic growth and income distribution in China through running simulation on an applied general equilibrium model (the GTAP model). Conclusions and policy implications are generated based on the simulation results.