Originally (pre-2005) it was undoubtedly true that China had kept its currency artificially weak. Since then the real appreciation (accounting for inflation) against the dollar has been very considerable. The real appreciation against China’s possibly most important trading partner – Japan has been tremendous.
It is difficult to say what Yuan value should be. I am inclined to believe that now Chinese currency ir artificially strong and is causing the loss of competitiveness. Free float and release of capital controls might lead to a massive capital flight.
CIO, HonTe Investments. Ran global macro at JPM. Yahoo! Finance Contributor. Ph.D. in Mathematics. Author, The Next Perfect Trade. No investment advice.
