The Chinese yuan now looks close to its fair value

At its peak, of over 10% of GDP in 2007, China’s current-account surplus offered firm proof that the yuan was undervalued. The evidence is much less conclusive now. China’s currency is 30% stronger in real trade-weighted terms than in 2005, when its peg to the dollar was scrapped. Partly as a result, the country’s current-account surplus fell to 2.8% of GDP last year.

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