Speaking at the World Economic Forum at Davos, Zhu Min, deputy governor of the People’s Bank of China, suggested that Beijing might consider renminbi revaluation – but only if other nations end their stimulus packages. China doesn’t see why it should take action on its currency while its trading partners retain stimulus policies that are implicitly protectionist – and trade barriers that are explicitly so.
Most economists agree that the renminbi will appreciate against the US dollar later in the year, but it will be a slow process. A significant, one-off appreciation of the, such as the 10% jump against the US dollar suggested recently by researchers at the China Academy of Social Sciences, is highly unlikely.
Incremental appreciation would do little to address the concerns of China’s trading partners, but would prove less of a shock to China’s exporters. In the meantime, keeping global markets in the dark about its plans for the renminbi may help Beijing to avoid a sharp increase in hot money inflows as it seeks to control inflationary pressures at home.