Tuesday, June 22, 2010

China Government Economist Says Yuan Could Depreciate

Yi Xianrong, an economist with the Chinese Academy of Social Sciences warned in a China Daily op-ed piece that the central bank's latest stance does not necessarily foreshadow a yuan revaluation.

"A flexible yuan exchange rate leaves the possibility of both appreciation and depreciation, with market elements exercising the largest say in deciding which tendency should dominate," he said.

This is clearly a different view from that of most global observers and falls more into line with the comments of Nouriel Roubini.

Bottom line: This looks more like a decoupling than a serious revaluation of the yuan.

1 comment:

  1. RW,

    Although I have been reading reports for some time (Andy Xie)that suggested the RMB would fall. While this may be true in the future, couldn't we say, ceteris paribus, that in the past we know the RMB wouldn't have fallen because of the increasing quantity of dollar reserves? In other words, if the RMB would've fallen the PBC would've had to buy RMB by selling a finite amount of dollars already held in reserve. Am I thinking right??