Is it really time to gear up that trade war?:
Li Daokui, an academic adviser to the central bank’s monetary policy committee, has said previously that since the trade surplus might account for less than 1.6 percent of GDP in 2011, the yuan might depreciate in two years.
“Capital outflows are evidence that the yuan is overvalued, not undervalued,” Bloomberg News cited Tim Condon, Singapore-based head of Asian research at ING Groep NV, as saying.
“We think the suggestion of outflows is a near insurmountable obstacle to any exchange-rate reform like widening the yuan trading band.”
But Zhuang said that the outflows would create a better environment for China to let market forces determine the exchange rate, because successful currency reform must be based on the possibility of fluctuations in both directions.
The story is here and hat tip goes to Mark Thorson.