Thursday, April 21, 2011

Higher Prices In China, Or Abroad?

If, for China to hike the renminbi,
A domestic political sin be,
But yuan 'ppreciation
Would quiet inflation,
Then therein the Yang and the Yin be.

China's Premier Wen Jiabao broke new ground for his government yesterday with a public acknowledgment of the role that a strengthening yuan could play in restraining Chinese inflation. Although the central bank had begun to allow very gradual appreciation of the renminbi ("people's currency") last summer, it has seemed until now that the government's top priority was to check the yuan's rise so as to hold down the prices of Chinese exports. Now however, rising inflation may bring Chinese policy more in line with that favored by competitors such as the USA and Germany. 

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