RSS
China's currency concession: Will it help the U.S.?
At long last, China is allowing the yuan to trade more flexibly against the dollar. Does this mean good things for America's economy?
China has raised the value of the yuan by 0.42 percent against the US dollar.
China has raised the value of the yuan by 0.42 percent against the US dollar.
Corbis
C

hina has relaxed its constraints on the yuan, allowing the currency to trade more flexibly against the dollar for the first time in several years. The surprise announcement came from Beijing over the weekend, and on Monday the yuan hit a five-year high against the dollar. The U.S. has been pressuring China to relax its currency peg for some time, arguing that the prevailing exchange rate has given the country unfair competitive advantages. Beijing has now given some ground — but will the move offer a much-needed boost to the U.S. economy? (Watch a Fox Business report about the yuan's rise)

Good news for the White House, and good news for the economy: This is a "huge victory" for the Obama administration, says Douglas A. McIntyre at Wall Street 24/7. By avoiding a "trade war," and focusing on "diplomacy" it has forced a "gradual revaluation of the yuan." A stronger yuan will be a boon to the U.S. economy, "which needs a rise in exports to sustain a recovery."
"China to take yuan off dollar peg, huge victory of Geithner"

In the near term, this could make things worse: The Chinese currency will still be "guided by a 'basket' of currencies," which means that the troublesome condition of the euro might yet see the yuan slide lower against the dollar, says The Economist. This move is best seen not as a "momentous change," but as a "slow, deliberate step towards a more sophisticated currency regime."
"More wobble than float"

This move was about politics, not economics: This announcement is "nothing but hot air" — a token concession ahead of this weekend's G20 conference in Toronto, says Scott Paul at Huffington Post. The yuan is "undervalued by up to 40 percent," and this change is neither "significant nor fast enough to put a real dent in our enormous trade deficit" or boost our export sector.
"China's currency charade"

EDITORS' PICKS

THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER

Subscribe to the Week