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Foreign Exchange

Renminbi: Small steps on a long journey

China's currency revaluation is more evolution than revolution but will have a number of knock-on effects

Zhou Xiao Chuan: good timing

China's long-awaited revaluation of its currency, the renminbi, has had a modest impact on the international financial markets. However, the move, which saw the renminbi revauled upwards by 2.1% in June, looks well timed. The new system, which sees the renminbi managed against a basket of currencies as opposed to being held at a fixed rate against the dollar, is suitably flexible for China's immediate purposes. At the same time, it panders somewhat to the China-bashers in the US Congress, the more vociferous of whom had been barking for a revaluation of more than 25%. Basket

Of course that was never going to happen, but China's move is more than just a sop to US politicians looking for scapegoats for the structural weaknesses in their own economy. In a later statement, China's central bank governor, Zhou Xiao Chuan, added a little more meat to the bones of the country's new currency framework when he disclosed the constituent currencies, although critically not the weightings, within the basket against which the renminbi will be "referenced".

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