China's currency near fair value

[RandomGuy]

http://www.economist.com/node/21553041

AT ITS peak, of over 10% of GDP in 2007, China’s current-account surplus offered firm proof that the yuan was undervalued. The evidence is much less conclusive now. China’s currency is 30% stronger in real trade-weighted terms than in 2005, when its peg to the dollar was scrapped. Partly as a result, the country’s current-account surplus fell to 2.8% of GDP last year.

It is worth noting the commodities, i.e. raw materials, China is consuming have been on a run up in the same period, and contributed to the reduction in the surplus.

The Chinese government heaily subsidizes gasoline, so they are vulnerable to oil price run ups, as the goverment aborbs the extra costs, instead of passing them on to consumers. This is probably one of the large factors driving the Chinese to buy cars, pun intended.

Remember this the next time you hear some US politician ing about the Chinese currency. Either they are uninformed, or lying about it.

[hater]

but, but Romney wants to start trade wars