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The yawing of the Yuan

China has finally revaluated the Yuan. Fixed at 8.28 to a dollar for years, China has chosen to move towards a flexible currency. The shift from 8.28 to 8.1 - albeit small (2%) is a significant one. First of all the very fact that China revaluated it's currency is significant. Second, it has chosen to restrict the Yuan within a very strict band of change. The People's Bank of China will allow the Yuan to vary by just 0.3% per day. So, baby steps it is. Don't look at the 0.3% and go 'aaargh' .. its 0.3% per day .. which can very well mean a significant change over time.

China, though reluctant to make the change, chose to do so at an opportune time. Chinese manufacturers will find their products more expensive for their customers to buy, but their (Chinese) imports will be cheaper. This will mean good news for those who import their raw materials. In the US, I doubt that major traders with China will increase prices. Walmart, in typical style will probably aim to make itself leaner - and meaner to soften the blow instead of raising prices.

For China, this means a variety of things. The Chinese economy, growing at break-neck speed since time unknown, can now be effectively regulated. Also the growing tension between the US and China will decrease somewhat. I think this is a nice trick China is playing. With tensions high over the revaluation, Unocal and Maytag, the Chinese are foxing the emotionally high-strung anti-China US senators into thinking that China blinked first. This is bound to result in a laxness - an opportunity the Chinese will not let go waste.