China's trade balance is sensitive to fluctuations in the renminbi's real effective exchange rate, new research from the Bank for International Settlements posits.

The research shows that a 5% real appreciation of the effective exchange value of the renminbi, would have led to a reduction in export volume of about 7%. However, the analysis also shows that real currency appreciation also reduces imports to China, which limits the net impact of exchange-rate policy on the trade surplus.

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