China is following a managed appreciation and has taken the yuan up to 6.5 per dollar which is the highest level since 1993. This solves a number of issues. It releases pressure from the global community on trade imbalances. It also serves as a mechanism to help reduce inflation through cutting the cost for imports. This is especially the case for food coming from the US. Finally, the gradual appreciation allows exporters to adjust to the lower revenues. This may allow companies to avoid losses.
The PBOC has followed a steady policy of raising reserve rates, increasing interest rates, and allowing for appreciation all to stop inflation. We have not seen the impact on prices yet, but they are using all the tools available to control price gains.
The PBOC has followed a steady policy of raising reserve rates, increasing interest rates, and allowing for appreciation all to stop inflation. We have not seen the impact on prices yet, but they are using all the tools available to control price gains.
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