Remember the Renminbi.

• Position: NEWS

It is important to understand that the Chinese have not just changed their exchange rate. They have changed their exchange rate system. China has moved from a fixed exchange rate to a floating exchange rate system. It is similar to the managed floating exchange rate system that Australia had in the early 1980's before we fully floated the exchange rate in December 1983. At that time, we called it a 'dirty float'.

Perhaps the best analysis of the Chinese revaluation was written prior to the event. It is contained in testimony to the US senate on 23 June by Alan Greenspan. In this testimony, Greenspan noted that the Chinese trade surplus is much larger in gross terms than it is in value added terms. China has become the point of final assembly...