Protecting monetary sovereignty

Allegations that the renminbi is undervalued are unfounded because its real effective exchange rate has continued to increase since 2005

The exchange rate of the Chinese currency has been a source of contention in the international arena in recent months, especially since the International Monetary Fund issued a statement in late July stating that the renminbi is undervalued by 3 to 23 percent and the passage of the Currency Exchange Rate Oversight Reform Act of 2011 by the US Senate in October. Brazil is also trying to move a long-running exchange rate war to the World Trade Organization.

However, the assertion that the renminbi is undervalued is completely groundless. It has appreciated 21 percent since 2005 in terms of its real effective exchange rate, which has approached the equilibrium exchange rate level since last year, when the country introduced its most recent exchange rate reforms.