You are not alone. The renminbi is with you. But it has managed to pull off the impressive trick of being a lot less undervalued without actually having risen very much.
The IMF said this week what others (especially the Peterson Institute, whose estimates often get a lot of airtime on Capitol Hill) have also suggested: the RMB is a lot less undervalued than a year ago. The Fund, which now combines various different concepts of currency valuation to take a judgment, called it “modestly undervalued” without putting a number on it.
The Peterson gurus are less coy: they reckon the RMB needs to rise just 2.8 per cent in real trade-weighted terms (i.e. against a basket of currencies, adjusting for inflation), and by 7.7 per cent against the dollar, to achieve a sustainable external position. These are big changes from a year ago, where the trade-weighted and dollar undervaluations were 16 per cent and 28.5 per cent respectively. (Naturally these changes don’t seem to have made much difference to the China-bashers in Congress or out on the campaign trail, who tend to use the Peterson estimates when it suits them and ignore them otherwise.) Read more
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An amusing little row has broken over the head of the Romney campaign, just as the candidate arrives in Britain for the Olympic opening ceremony. A Romney foreign-policy adviser has been quoted in Britain’s Daily Telegraph, saying that Romney will lay more emphasis on a Special Relationship with Britain because:
“We are part of an Anglo-Saxon heritage, and he feels that the special relationship is special,” the adviser said of Mr. Romney, adding: “The White House didn’t fully appreciate the shared history we have.”
This quote has been condemned by some Obama supporters as implicitly racist and has even drawn condemnation from Vice-President Joe Biden. The Romney campaign has moved swiftly to distance itself from this rather maladroit statement.
So which Romney adviser aired these views? Suspicion swiftly fell on Nile Gardiner, a Brit who works at the Heritage Foundation and has been named as one of Romney’s foreign-policy advisory team. Gardiner blogs for the Telegraph and has admitted speaking to the Telegraph journalist who wrote the story – but, despite strong circumstantial evidence, denied being the source of the quote. Read more