UPDATE released 05 jul 22

RMB appreciation

TIMING - Why end of July?

Just in time for two reasons - firstly, Wu has something in hand on RMB revaluation when he visits USA later in the year, second is to protect small and medium enterprise [esp light industries] on their export earnings which are based in USD as shipping season for Xmas comes to a close around end July. Larger enterprises have to bear the costs of this revaluation.

Why the sudden visit by US treasury officials to China one day after the incident

Apparently, Snow has underestimated the IQs of China's officials in handling the case. They expect easy manuvering like the Japanese twenty years ago. Now with the internet, opening up for 20 odd years and with HK also providing key insights in the intl finance area, the dropping of US as an anchor currency means a rough period ahead for US treasury operations esp long bonds. This change of anchor currency or reference currency however you call it has serious implication for the US. US treasury officials has to redefine their strategy and they want to know more about China's thinking before they map their next moves.

Any more revaluation ahead

No urgency to revalue in 2005 anymore. It will take the heat off until US mid term elections in 2006. A lot of factors such as oil, interest rates, exch rates of US with other currencies will have a compound effect on whether RMB will appreciate further. If the US economy keeps growing slowly without a recession, the pressure is less on RMB to appreciate and vice versa.