Western producers who hope for a more appreciated and therefore less competitive yuan can rest their hearts. The upward race of the Chinese currency is, at least for this year, over. The reason lies in China's external accounts, which have seen the surplus decrease radically, to the point of even seeing some monthly deficit appear, albeit not definitively. The Chinese government therefore has powerful weapons to oppose the 'interested' recommendations of competing countries, which have always asked for everything and more: a massive revaluation of the yuan and a change in the growth model towards expanding domestic demand rather than towards exports.
Western governments have basically gotten what they wanted. The change in the growth model is underway and the revaluation has taken place, and it is bigger than what appears from the nominal exchange rate. The main measure of competitiveness is the real exchange rate, which takes into account inflation and the dynamics of internal costs. So Chinese premier Wen Jiabao is right when he observes that the Chinese currency is reaching a point of equilibrium.
Read also the China Daily
