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