Chinese Revaluation Needs to Come Soon

The WSJ writes on the most important economic issue right now, the absurd peg of the Chinese yuan:

Surging Chinese exports and an expansion in the U.S. trade deficit have shown this week that a revaluation in the Chinese yuan is the most urgent item of unfinished business for the global economy.
Most economists believe a modest appreciation in the yuan is inevitable sometime this year. The latest move by the People’s Bank of China — an incremental increase in its T-bill rate last week and a hike in reserve ratios and one-year T-bills on Tuesday — could even pave the way for this.
But time is running out. Anger is growing around the world over what many see as a grossly unfair advantage for China’s exporters. “The monetary disorder has became unacceptable,” said French President Nicolas Sarkozy last week.
China’s leaders have said nothing of plans to raise the value of their currency — even though this would help diffuse inflationary pressures — and have at times sounded hostile to the suggestion.

This could get ugly. China currently holds $2 trillion in reserves.

Posted by on January 13th, 2010 at 9:56 am


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