Currency War: United States Vs. China – Round 998,793,487,48515 October, 2011, 2:40. Posted by Zarathustra
Tags: Chinese Yuan, United States
I haven’t written much on the US Congress’s push to
blame China urge China to allow Chinese Yuan to float/appreciate. I guess I have a few words to say about it.
I do get that Chinese Yuan has appreciated against the US dollar by about 30% since China allowed Yuan to have an orderly ascent in 2005. In the same period of time, however, because the US dollar has depreciated against almost every other currency, as a result, Chinese Yuan has not appreciated against all other major currencies. I made that point when I plotted the following chart showing that Chinese Yuan, while steadily appreciating against the US dollar since it was allowed to appreciate slow again in 2010, its value against other currencies are more mixed. The picture would be mixed as well if you try to look at it since 2005.
I have previously made the case that Chinese would not want Chinese Yuan to appreciate in an economic slowdown, and they may even want to see Chinese Yuan depreciates. A downright depreciation is probably not possible at this moment in time, and before that can happen, the first step would be to freeze the currency so that it stop appreciating against the US dollar.
You may not believe it, but despite all these daily wiggling, Chinese Yuan seems to have largely stopped moving against the US dollar (we know that Yuan rise before the Senate Vote, but it has dropped back to where it was).
No one can be sure at this moment as to whether this is just a temporary pause in this orderly ascent, or China is really going to do what they did in 2008 (i.e. to stop CNY from appreciating against the US dollar). But for the moment at least, the Chinese just don’t care what the US is thinking.