Fallacies behind RMB speculation

China will move on currency reform at her own pace. Rampant speculation on RMB revaluation will only increase Beijing''s policy inertia.

The market has been betting on Renminbi RMB revaluation since 2002. Official comments about China's flexibility towards currency reform and a series of small steps to relax the RMB control, including allowing insurance and pension funds to invest overseas, Chinese emigrants to transfer their asset out of China, and Chinese tourists and students to take larger amount of money out of China, have revived speculation that an RMB revaluation is imminent. Many also believe that Beijing would heed US pressure to revalue the RMB to help cut America's huge current account deficit amounting to 5.6% of US GDP.

The RMB bet

Based on such beliefs, some...

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