How Appreciation of the Chinese Yuan will Affect Minor Metal Prices: Part I

Part I: Why China Will Allow Greater Appreciation of the Yuan

"China will continue to steadily advance the reform of the formation of the renminbi exchange rate mechanism under the principle of independent decision-making, controllability and gradual progress," Chinese President Hu Jintao.

Following China’s decision to allow its currency, the yuan, to appreciate by a token half a percent against the US dollar last month, analysts have continued to speculate what the next exchange rate move by China’s government will be and when it may come. In the first of this two-part series, we talk economics. First we discuss exchange rate regimes and the domestic economic problems arising from China’s current exchange rate policy. We then explain why the only effective resolution to China’s economic issues is to allow greater appreciation of the yuan. In Part-Two, we will discuss how appreciation of the yuan will impact the international prices for a number of minor metals.