Thursday, July 21, 2005

Hopefully

China's small revaluation of the yuan may have very little effect on the balance of payments, but it's incredibly important politically. In particular, it has delayed a vote on the potentially disastrous Schumer-Graham bill which would put a flat 27.5% tariff on all Chinese imports.

Also, small movements like this might be a good way to ease the depreciation of the dollar. Remember, there is no threat of a run on the yuan since China is keeping the yuan weak. They can print as much yuan as they want to keep it weak, it's keeping a currency strong that's hard to do. Revaluing the yuan all at once, or letting it float would probably not be good.

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