China’s financial authorities have created a mechanism to loosen the peg between its currency, the Renminbi, and the US dollar, the Chinese currency has actually appreciated slightly, but economic analyst Arthur Kroeber is not expecting any huge changes, he tells CSM.
When the RMB was last allowed to float within limits, between 2005 and 2008, it gained almost 20 percent in value. Low-end manufacturers stayed open by boosting efficiency, says Arthur Kroeber, head of the Dragonomics consultancy. “But they’ve squeezed as much efficiency … as they can,” he adds. “This time a rising currency will start to make these guys less competitive. Over the next five years, low-end industries will be moving out of China.” Mr. Kroeber does not expect the RMB to gain enough value to cause “large-scale havoc” for exporters.