China has been the subject of criticism from many countries, especially the U.S because of the country's attempt to peg the yuan so it could gain some competitive edges. This year, the Fed has persistently demanded China to let its currency float freely, but the result hasn't been what they expect. However, in this article the author argues that the real yuan-dollar exchange rate has risen more than we think. "A real exchange rate takes account of price movements in each country. If prices rise faster in China than in America, China’s real exchange rate goes up, even if its nominal exchange rate stays the same. That’s because higher prices at home make China’s firms less competitive abroad, just as if their currency had gone up."
So it is probably not too bad after all?
1 comment:
this article is interesting because they have changed the measures that go into the calculation of real exchange rates. however, it doesn't seem logical to compare it that way without accounting for the same changes in the US rate
Post a Comment