Tue 2010-04-20 10:58 EDT
Get the Yuan Right, Prove Pundits Wrong: Hype over an 'imminent' increase in yuan value ignores China's greater need for higher interest rates and fewer bubbles
Unless China exits its economic stimulus quickly, the nation's inflation rate could rise to double digit levels sooner than many expect. The right sequence of events for a proper response to inflation would be to raise interest rates and then, if necessary, move the yuan exchange rate. But acting on the currency first, especially in small steps, would further inflate China's property bubble and inflation, potentially leading to a major economic crisis in two years. A small increase in the yuan's value would fail to resolve two pressing problems: inflationary pressure at home, and political pressure from the United States. Moreover, a small appreciation would attract hot money, stoking inflationary pressure...
bubble; higher interest rate; hype; imminent; increased; proving pundits wrong; Yuan right; yuan value ignores China's greater need.