Please do not make the renminbi the focal point of the US presidential election agenda. That is the message sent by China in recent weeks as it allowed its currency to appreciate to a 19-year high on Friday against the dollar. It knows that manipulation
of its currency is a popular scapegoat for the loss of US manufacturing and jobs.
No one knows for sure how much US policy drives China’s currency management. But the renminbi almost hit the upper limit of its daily trading band against the dollar on two consecutive days last week. That shows strength in demand against a backdrop of a weakening economy. If anything, the pressure is on for the renminbi to weaken. China’s exports were up only 3 per cent in August from a year earlier, and just 1 per cent by volume; exporters are keeping more receipts in foreign currency, notes Crédit Agricole. Inflation is also manageable, at just 2 per cent last month. These are normally the criteria that would prompt the Chinese central bank to step in and halt renminbi gains.