China Review News (CRN) recently reported that the Chinese currency (RMB) is suffering a very unusual valuation problem. It is depreciating internally and appreciating externally at the same time. All economists seem to agree that this is an obvious sign that demonstrates a loss of balance between China’s domestic economy and its exports. In the past eight years, the RMB to U.S. Dollar has appreciated over 35 percent. Meanwhile, for many years, the Chinese government has been maintaining a “monetary easing” policy. It has supported the government-investment driven growth model for more than a decade. With an aging Chinese society where savings are declining, coupled with high debt and manufacturing over-capacity, China’s currency policies are facing more and more challenges. The article’s author expressed the belief that the top priority for now is to control domestic inflation tightly and to increase the application of the market mechanism to the RMB exchange rate.
Source: China Review News, November 24, 2013