China's Yuan May Strengthen Against the Dollar
Investors last week were buzzing about a report released by the Chinese central bank ahead of President Obama's visit to the country, which indicated that Beijing might once again be thinking of letting the yuan rise to reflect China's growing heft in the global economy. The report surprisingly omitted the usual language that Beijing would keep the yuan "stable at a reasonable and balanced level." The yuan's relatively low value is a key reason that Chinese exports remain so competitive on the global stage; it's also a reason for major trade imbalances between the United States and China, something that underscored the recent global financial crisis.
But economists say the Obama administration shouldn't expect any major change in the short term. "A token shift [in the currency] is the best I would expect," says Morgan Stanley Asia chairman Stephen Roach, noting that China's recovery is still fragile. What's more likely is that, assuming steady economic growth, Beijing will eventually resume its policy of letting the yuan slowly appreciate, something it had capped last year with the advent of the financial crisis and the plunge in exports. Currency watchers, take note: if the yuan does start rising steadily again in 2010, it will be a sign that China is confident it can move away from export dependence and views its economic recovery as real and lasting.
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Rana Foroohar is the deputy editor in charge of international business and economics coverage for Newsweek. She conceives and edits a weekly section of breaking news stories, features and guest articles. She also writes economic cover stories and opinion pieces, and pens a bi-weekly column on the global economy.
Foroohar oversees Newsweek's team of global correspondents and stringers, directing their reporting on the week's business news. She edits regular columnists such as hedge fund manager Barton Biggs, Morgan Stanley emerging markets head Ruchir Sharma, Yale professor Jeffrey Garten and PIMCO CEO Mohamed El-Erian. She is in charge of economic coverage for Newsweek's annual Davos special issue, which features pieces by world leaders and economic thinkers, and also chairs panel discussions while at the World Economic Forum in Davos.
Prior to taking this New York based position in 2007, Foroohar spent six years as Newsweek's European Economic Correspondent based in London, covering Europe and the Middle East. During this time, she was awarded the German Marshall Fund's Peter R. Weitz Prize for transatlantic reporting. She has also worked as a general editor at Newsweek, a reporter for Forbes magazine, and as a writer and editor at various other national and international publications. Foroohar graduated in 1992 from Barnard College, Columbia University, with a B.A. in English literature. She is a life member of the Council on Foreign Relations.
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