Chungwoo: OECD: Chinese Yuan Still Too Low

The Organization for Economic Cooperation and Development
(OECD) recently issued a report on the Chinese Yuan, which thoroughly assessed
the currency’s appreciation since it was “revalued” over two years ago. While the Yuan has technically risen over 10%
against the USD, the OECD concluded that in real terms, the currency has
actually fallen. The official rate of inflation
hit 6.5% this year, and international economists reckon the true figure is
probably much higher. Furthermore, the
government recently revised its estimate for full-year GDP growth to 11.4%,
which means price levels may rise further, eating into the real value of the
RMB. In fact, the OECD estimates that
the Yuan remains undervalued by as much as 40% and views the “solution” as a
combination of tighter monetary policy and looser exchange rate policy. The Associated Press reports:



While the report did not directly criticize China's
foreign exchange controls, it noted that efforts to tighten money supply to
counter inflation were not having much impact.



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