Patience, not Pressure, Will Revalue China’s Yuan

Patience, not Pressure, Will Revalue China’s Yuan

With 2009 and its economic woes behind them, the world's major economies share a common goal for 2010: recovery. However, they also share a common problem that could stand in the way: China's undervalued currency. A G-7 meeting in Canada next month looks increasingly likely to be a forum for discussing remedies for global currency imbalances, with a focus on the yuan. But can outsiders really do anything to influence China's exchange rate? Or would a better strategy simply be to wait for Beijing to make the decision to revalue the yuan on its own?

Before answering these questions, it is worth discussing how we got to this point and why a weak yuan affects global recovery prospects in the first place.

The price of a country's exports in foreign markets is largely determined by the value of its currency. The lower the value of the currency, the cheaper and more attractive a country's goods are abroad, with the opposite true as currency values increase.

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