Three weeks ago I wrote that China was taking advantage of softness in the market t0 'talk' tightening. Despite Jim O'Neill's assertion that a hike in the currency's value was imminent, I felt that China was less likely to raise the yuan's value at present, as it would hamper the recovery of its coveted export sector, and that it would opportunistically continue talking.
New York Times confirms today that China's bank chief, Wen Jiabao, has officially announced that it is unlikely to so.
BEIJING — China’s central bank governor indicated Saturday that the government was unlikely to detach the value of China’s currency from that of the dollar anytime soon, echoing Prime Minister Wen Jiabao’s statement on Friday that exchange rates would remain “basically stable” for now.
... At a Saturday news conference, the central bank head, Zhou Xiaochuan, said China should be “very cautious” about revaluing its currency, also known as the yuan, as long as major economies remained mired in slow growth.
Translation - We will continue to take advantage of our doubly cheap currency to drive recovery of our over-advantaged, over-capacity export sector, at the expense of our trade competitors, and Americans will continue to be able to buy cheap goods at Walmart during this difficult economy - sounds like a win-win.
For much more analysis on China, visit AdvisorAnalyst's China page.
