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'RMB undervaluation' claims defy economic logic

By Zhou Xiaoyuan (People's Daily Overseas Edition)

08:13, November 11, 2011

Edited and translated by People's Daily Online

Beijing, Nov.11 (People's Daily Online) --U.S. Department of the Treasury's Assistant Secretary for International Finance Charles Collyns recently said that the United States will continue to put pressure on China before the APEC summit, urging it to accelerate the pace of RMB appreciation.

Drastic fluctuations in RMB exchange rate partly due to speculation

The central parity rate of the RMB against the U.S. dollar set new highs four times prior to the G20 summit, rising from 6.35 to 6.32. It even broke 6.32 for the first time, setting a new record since the reform of the RMB exchange rate system.

Guo Tianyong, director of the Research Center of the Chinese Banking Industry at the Central University of Finance and Economics, said that the recent moderate fluctuations in the RMB exchange and the repeated new highs of the RMB exchange rate against the U.S. dollar have mainly resulted from the economic downturns in Europe and the United States and their relaxed monetary policies.

However, the RMB exchange rate may further appreciate in the long term and China will promote its appreciation in a gradual manner.

RMB exchange rate stands within a basically reasonable range

China’s Minister of Commerce Chen Deming has reiterated that the RMB exchange rate is within a basically reasonable range. China's trade surplus is only a little above 1 percent of GDP, and its overall international balance of payments surplus is far below 3 percent of GDP.

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Canada at 2011-11-1470.36.49.*
The U.S. expects other countries to pay off its debt. Canada is receiving $20.00-$25.00 less per barrel of oil delivered to the U.S. than other countries in the world pay. U.S. businesses and consumers are being subsidized by Canada - that"s a big competitive advantage for the U.S.
Observer at 2011-11-14222.127.65.*
DrObserver.. you funny!!!
DrObserver at 2011-11-11111.240.61.*
Why would anyone want what they produce today to be worth less tomorrow? That is what the US is asking: buy our debt at today"s price, and we will pay it off with "funny money" tomorrow. Why should China follow such an economic suggestion? The current system balances what RMB trades for against many other currencies, so, over time, it continues to represent equivalent value. The USD drops . . . and keeps on dropping.

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