China will not let renminbi appreciate in 2010

Respondents to a poll conducted by FinanceAsia say that China's currency will not appreciate during 2010.

China is under increasingly strong pressure from the US and Europe to let its currency rise, but readers of FinanceAsia are confident that it will not yield this year. Indeed, half the respondents to our poll last week said that China will delay currency appreciation until at least 2011.

China's foreign exchange reserves grew by $127 billion in the last quarter of 2009 to reach a total of $2.4 trillion and its economy grew by 10.7% (8.7% for the full year), which analysts say is adding to the pressure on China to let its currency rise. According to our 117 poll respondents, a policy change in 2010 is most likely to happen in the third quarter, with 20% of respondents citing this period, followed by 17% for Q2 and much smaller votes in favour of Q1 (8%) and Q4 (5%).

Futures prices are also predicting appreciation during 2010, but our readers are more inclined to believe China's leaders than analysts or the market. Wen Jiabao, China's prime minister, said on December 27 that the country will "absolutely not yield" to international pressure for it to move away from the dollar peg that it has maintained since July 2008 -- and respondents to the poll overwhelmingly agree that he is being sincere. A total of 50% of the respondents said that China will not let its currency appreciate for another year at least.

Of course, our question does not capture the subtlety with which China may, in fact, act. Although economists tend to favour a one-off revaluation, China has long preferred to do things gradually and will likely act slowly in letting the renminbi appreciate. But the results of our poll suggest that 2010 will not bring any significant appreciation in the value of the Chinese currency, whether such appreciation is gradual or not.

Photo by Imaginechina.

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