Expectations Grow that China Will Revalue Yuan

It now seems likely that the Chinese government will raise the currency rate in response to international pressure, the Los Angeles Times reports:

A change in policy would combat inflation and diffuse some of the anger directed at Beijing for protecting its exports with a weak currency, economists say.

“A move appears to be imminent, but a larger . . . appreciation is unlikely,” said Ben Simpfendorfer, chief China economist for the Royal Bank of Scotland, one of several economists from leading banks predicting a revaluation.

Consensus is growing among analysts that China will gradually strengthen its currency 3% to 5% against the dollar over the course of the year. That would fall far short of the demands of U.S. labor groups and manufacturers who believe the yuan is undervalued by 25% or more.

Still, the small increase could create some goodwill at a time when American and Chinese leaders are seemingly determined to protect jobs at all costs, even if that means a trade war, experts say.

April 1, 2010 1:05 PM
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