Prospect of coming Yuan appreciation
US policy makers should understand the harder they pressure China to revaluate Yuan, the less likely they are going to get it. China is not another Japan.
What the US should do is to let Chinese policy makers appreciate that it’s mutual beneficiary to appreciate Yuan: with Yuan pegged to US dollar, China is essentially ‘importing’ the super easy monetary policy of the US, which adds fuel to fiscal and credit stimulus, potentially leading to even higher inflation.
Watch this FT video analysis on China’s recent exchange rate.