The exchange rate between the chinese yuan (CNY) and the US dollar (USD) has reached USD0.15 today. Since May, it has appreciated by 8%. This is bad for chinese exporters, because when they mostly get paid in USD. So when they change to CNY, they get paid 8% less. So they usually add this increase to the sales price. All of you who are buying in China are probably in the same situation, all your suppliers trying to increase the prices and you trying to hold as decently as you can.
There are several factors that are pushing the CNY upwards:
Given all these forces pushing upwards, left to market forces the RMB would probably appreciate even faster, and it’s quite probable that the Chinese government is quietly intervening to protect the exporters, keeping it from appreciating too quickly.
No reason to panic though, it’s nothing that has not happened before and, as this chart shows, there is still a lot of room to appreciate:
Current exchange rate of 0.15 is still well below its maximum of 0.165. As we can see, before 2005 the CNY was pegged to the dollar, at 0.121. Mid 2005 China gradually appreciated the CNY until it reached 0.147. After a while, the US began pushing for China to let its currency float, threateted to label China a currency manipulator and mid 2010 the pressure became too much and China appreciated again. From then, it has been a game of cat and mouse.
So if we look at the big picture, under current situation the RMB is probably still undervalued, and it might continue to rise against the USD. We will see what does the chinese government do about it.