A WSJ article reporting on comments by Chinese Premier Wen Jiabao noted his concerns about inflation. Later it discussed the possibility that China would increase the value of the yuan. Remarkably, it never noted that raising the value of the yuan would reduce import prices and therefore offset inflationary pressures.
For example, if the yuan were to rise by 20 percent against the dollar and other currencies, then as a first approximation oil and other import prices would fall by 20 percent. (The actual decline will be somewhat less, since China's demand for imports will increase putting upward pressure on prices.) This decline in import prices would go far towards stemming inflation, therefore a higher valued yuan would be an obvious response to concerns about inflation.
Unlike many news organizations, the Prospect has remained staunchly committed to keeping our journalism free and accessible to all. We believe that independent journalism is crucial for a functioning democracy—but quality reporting comes at a cost.
This year, we’re aiming to raise $75,000 to continue delivering the hard-hitting investigative journalism you’ve come to expect from us. Your support helps us maintain our independence and dig deeper into the stories that matter most.
If you value our reporting, please consider making a contribution today. Any amount helps secure our future and ensure we can continue holding power to account.
