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Study: Substantial Revaluation Of Yuan Inevitable

As Chinese President Hu Jintao gets ready to visit the U.S. next week, the Manufacturers Alliance/MAPI is saying China's rapidly growing trade surplus will lead to a substantial revaluation of the yuan, the Asian nation's currency.

China's merchandise trade surplus with the rest of the world will more than quadruple this year to $140 billion and China's current account surplus, a broader measure of its international economic position, will reach $180 billion, predicts Ernest Preeg, senior fellow in trade and productivity at the alliance, an Arlington, Va.-based business and public policy research group. Looking at those numbers, Preeg concludes previous estimates that the yuan was undervalued by 25% to 50% were way too low and foresees an inevitable and large revaluation of yuan. "A 50% revaluation of the yuan is not excessive by historical standards," he says.

For more than two years, U.S. manufacturers, among others, have been pressuring the Bush administration to pressure China to revalue its currency to better reflect the true costs of production. China began a carefully controlled "float" of its currency this summer, following a 2.1% revaluation. But it remains to be seen just how much of a difference that will make to U.S. manufacturers.

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