The Yuan's Course

The US-China Strategic and Economic Dialog is underway. [0] The topics span many issues. One of the perennials is the yuan's real value and the Chinese trade balance. Here are two figures. First, one needs to recall the distinction between bilateral and multilateral real exchange rates.

Chinese inflation is decelerating [0]. This suggests that whatever further real CNY appreciation occurs is likely arise from nominal appreciation, over the near term. The news, not completely unexpected, is that inflation is falling rapidly.

...through the Lens of Multiple Regression I hesitate to add to the welter of commentary on President Hu Jintao's state visit (e.g., [0], but Professor Mark Wu's recent NYT Op-Ed China's Currency Is Not Our Problem inspired me to think again about how econometrics can inform policy. Bivariate vs.

Maybe. Governor Romney has stated that he will declare China a currency manipulator on Day One, should he be elected President. In contrast to his other policy positions – from tax rates on the upper incomes, defense spending, coverage of pre-existing health conditions, the Blunt Amendment, Afghanistan timetable, first strike on Iran – he has exhibited remarkable (and pretty unique) constancy in his desire to call China a currency manipulator.

China is in the news; or more accurately, the Chinese currency, isFrom Reuters: A sharp rise in China's yuan currency might cut the U.S.

The portents from China, on the price front, are ominous. Inflation is rising, as shown in Figure 1:

As the euro has plummeted against the USD, there's been concern that efforts to rebalance the global economy will face increasing headwinds. [Bergsten] [Duy]. This worry is only added to by the already widening US trade deficit [1].

The August numbers are in. From MarketWatch: China posted a wider-than-expected trade surplus in August as imports unexpectedly contracted from the year-ago period, suggesting anemic domestic demand, according to data released Monday. Exports exceeded imports by $26.7 billion during the month, beating expectations for a $17.2 billion surplus in a Dow Jones Newswires survey of economists.