Reuters calls it like it is on China's undervalued currency
The world trading community has been putting heavy pressure on Beijing in recent years to properly revalue its currency. This is because China's deliberately undervalued currency not only provides a huge boost for Chinese exports, but also violates world trade agreements and has led to widespread distortions of global markets.
Ironically, the Chinese economy may be facing enough troubles of late that the nation's currency, the yuan, may actually stall on its own rather than appreciate in a previously hoped for manner.
Reuters reports that financial analysts are "reconsidering a widely-held assumption that the currency would appreciate 2-3 percent this year" due to a "slowdown in China."
This is a serious problem, coming as it does when Beijing has at least been brought to the table about getting its currency in order.
More significantly, it poses real problems for the U.S. America's manufacturing advocates have consistently argued that an undervalued Yuan is harming U.S. competitiveness:
The wild card, of course, is how the United States, which faces presidential election this year, will respond to a pause in yuan appreciation.
There has always been a strong diplomatic aspect to the yuan exchange rate, and much of the rises in its value against the dollar have been in reaction - albeit usually delayed - to U.S. pressure.
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