This paper analyzes the ex‐ante short‐term impacts of the Chinese RMB appreciation on the Chinese and world economy, using a novel approach of modeling nominal exchange rate adjustment in the GTAP, a global CGE model. Scenario results show that Chinese economy will be affected negatively, with lower real GDP, lower employment rates, and a decline in the trade surplus. Chinese currency appreciation has positive impact on the GDP of the major countries and regions, although by a small margin. With higher Chinese exchange rate, trade balance for other trading partner countries improves with the exception of the U.S.
