China faces mounting pressure from trading partners to loosen currency controls and is giving signs it might raise the value of the yuan to ease strains on its fast-growing economy.
A stronger yuan could help China’s leaders achieve their goal of making the economy more self-sustaining by boosting consumer buying power and reducing dependence on exports and investment. It could narrow China’s politically volatile trade surplus, making the flood of foreign money pouring into the economy more manageable.
A change might also help defuse tensions with the US, Europe and other trading partners who complain an undervalued yuan makes China’s exports unfairly cheap and hurts foreign competitors, possibly prolonging the global economic crisis. Some American lawmakers are calling for punitive tariffs on Chinese goods if Beijing fails to act.
(Source: The Sydney Morning Herald Online)