Another way the world has changed: Chinese currency

[RandomGuy]

We used to ding them for having their currency undervalued.

That has changed. So the next time you hear a politician blathering about it, you can know they are uninformed, and pointlessly bloviating. *

Executive summary: The yuan has risen 30% since 2003, as it has been allowed to float, and the pace of its rise is increasing.

http://www.economist.com/news/china/...-uncomfortably

TEN years ago, the yuan made its debut as a global economic bugbear. In June 2003, America’s then treasury secretary, John Snow, publicly encouraged China to loosen a policy under which its currency was pegged at 8.28 to the dollar. The next month four senators wrote an angry letter urging Mr Snow to investigate China for “currency manipulation”. The country was intentionally undervaluing its currency, argued Charles Schumer, a Democratic senator for New York. “The result is that everything they sell to other countries is the cheapest thing going.”

A decade later, Mr Schumer and other senators are still bashing the yuan: eight of them re-introduced a bill last week that would slap duties on currency manipulators. But much else has changed. Now allowed to float by 1% a day on either side of a reference rate set each morning by the central bank, the yuan closed trading on May 27th at 6.12 to the dollar, 35% stronger than its June 2003 rate. It has risen more against the dollar since March than it rose in the whole of last year, and its climb against Japan’s currency has been even steeper. Since November, when the markets began to anticipate dramatic monetary easing in Japan, the yuan has gained over 20% against a weakened yen.

...

It may still be undervalued compared to a truly free currency, but it is far stronger than it was when they started their true industrial revolution at the beginning of this century, and looks to get stronger still.












* Ok, you already know most of them are, but now you can prove it.

[RandomGuy]

Related is the economists' informal "big mac" index that is a handy, if highly informal, way of veiewing currency over/under evaluation relative to the dollar.
http://www.economist.com/content/big-mac-index

China sits in the middle of the pack on the "undervalued" side, FWIW.