With good reason, the Chinese have been accused repeatedly over the last few years of undervaluing their currency in order to boost exports. Since the middle of 2008, they have operated an informal peg to the US dollar to allow for automatic adjustment to US dollar fluctuations. A recent article in the Financial Times by Martin Wolf said “So, whether China likes it or not, it’s heavily managed exchange rate regime is a legitimate concern of its trading partners. Its exports are now larger than those of any other country. The liberty of insignificance has vanished.”In fact, if China was an individual, they would have a stratospheric .
The Chinese National People’s Congress is the usual platform from which the top leadership announces forthcoming economic policy measures for the year. This year, however, we have seen mixed messages from the top. Zhou Xiaochuan, governor of the People’s Bank of China, gave a clear indication that China is preparing to abandon the peg. He commented that the peg was a “special measure” to help China through the global financial crisis “These kinds of policies sooner or later will be withdrawn,” said Qu Hongbin, HSBC chief economist.”This is the most explicit comment on the renminbi’s exit from the current de-facto peg made publicly by top Chinese policymakers so far. ”
However, the Chinese commerce minister, Chen Deming, who is closely involved with China’s exports, said that it would take another two or three years before China’s exports fully recovered and said that the process of currency adjustment would be “gradual and controlled”. Premier Wen Jiabao simply used the same phrase that he has used in the last few months and said that the currency would stay “basically stable”. A former senior Chinese official is believed to have said that China is concerned about taking action on revaluing the currency before the stimulus packages announced by other countries come to an end.
