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Revaluing the RMB.

Friday, April 23, 2010

Revaluing the RMB is a matter of when, not if.  It is widely known that the RMB is undervalued and the Chinese government realises that it has to let the RMB appreciate. This would bring down the cost of living in the country and help put a lid on inflationary pressures.  However, China wants to do so at its own pace. 

The Chinese government is and has always been very concerned about not losing face. A confrontational attitude from outsiders would do more harm than good.

When the RMB is revalued upwards and we can expect this to happen in a series of steps in time, foreign companies with assets in China and with earnings denominated in the RMB will surely benefit. Also, foreigners should find investing in Chinese companies and assets attractive in such a situation as the value of their Chinese investments in their home currencies would likely increase.

China is on track to overtake Japan as the largest economy in Asia and companies which are well positioned to benefit from the growth of the Chinese economy will most likely do better than peers which are not.




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Yuan Gains May Help China Vault Past Japan to Be No. 2 Economy

April 19, 2010, 1:36 AM EDT


April 19 (Bloomberg) -- China’s anticipated move to let its currency appreciate may help the nation overtake Japan as the world’s second-largest economy, Australia and New Zealand Banking Group Ltd. said.

 
A 5 percent revaluation against the dollar could see quarterly gross domestic product exceed Japan’s as soon as July- to-September this year, estimated Liu Li-Gang, a Hong Kong-based economist at ANZ. The Chinese economy is likely to vault past Japan by year’s end even if the yuan remains stable, Liu said in an e-mailed interview.

Read complete article here:
Yuan gains may help China vault past Japan to be No. 2 economy.

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Weak Chinese Currency "Not Just An American Problem,"
FT's Martin Wolf Says.
Posted Apr 22, 2010 07:30am EDT by Peter Gorenstein



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