Perspectives On Allowing The Chinese Yuan To Float Freely China has a large trade surplus, United States has a large trade deficit. Is it fair to insist on China to manage the global imbalance and not ask the US to do the same? And should the re-balancing be achieved by allowing yuan to rise against the dollar? On broad multilateral exchange rate basis, in real terms, yuan has risen by about 10% this year (2010). What would happen if China were to sever its de facto peg with dollar? Will yuan appreciate against USD? Will it depreciate? Depreciation is not all that far-fetched. Roubini has said that as yuan has risen sharply in recent months against the euro, so a stronger yuan could not be taken for granted. If the euro were to continue to depreciate, yuan would have to be allowed to depreciate against the dollar. The same views were earlier made by Li Daokui, an academic adviser to the monetary policy committee of the People's Bank of China - the yuan could depreciate against the dollar if the euro falls sharply against the U.S. currency. Your Thoughts? |
