Chinese Currency (RMB) vs. US Dollar

The other day, one of my friends who will travel to China next week sent me a link to a chart. The chart is the 5-year relationship between Chinese currenty and US dollar. I know that Chinese Yuan (RMB) has appreciated quite a bit since the pegging ended in July 2005. I also noticed that recently the exchange rate broke the RMB7 per dollar milestone. However, I never looked at the course of the change until I got the link.

Well, if you ask me I have to say it’s quite dramatic. However, I am sure many politicians in this country would like to see a curve like this:

That represents an immediate appreciation of 40% that some say that RMB is undervalued, which is also blamed for the loss of manufacture jobs here. I don’t know much about currencies and jobs, but do you really believe a RMB5/dollar can solve the problem that factories in this country are facing?

I don’t think so. If goods from China becomes more expensive, companies like Wal-Mart will find other suppliers at low prices and the trade imbalance between China and U.S. will simply shift to other countries.

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