Since China engineered a stunning change in the way it manages its currency, many people have expressed disappointment with the modest size of the renminbi's appreciation. But these critics have missed the crucial point: the renminbi is no longer a currency rigidly pegged against the dollar, but one whose value will move up and down in response to changing economic and market Âfundamentals.
Exchange rate flexibility, not a one-off revaluation, is what really matters. A more flexible renminbi enables China to regain monetary control and maintain macroeconomic stability. A steadily strengthening renminbi dulls China's pain from ever rising oil and raw materials prices and improves the country's terms of trade. China may also have helped rein in the rising protectionism of the US Congress.
