Money matters

Upward movement in China’s exchange rate for its currency is about buying and selling stuff on international markets, and whose stuff costs more. Loftier explanations exist, but that is the essence.

China’s decision to “strengthen the flexibility” of the yuan exchange rate was as much about politics as it was global economics. The government in Beijing is making nice with the Obama administration and other nations before a meeting of the G-20 forum June 26 in Toronto.

China’s prosperity has the attention of the 19 other largest economies on the planet. To varying degrees, they have issues with China’s rigorous exchange policies that sustain substantial trade surpluses with countries from the United States to India.

A stronger renminbi makes China’s exports more expensive. Over time, shoppers would notice. An influx of cheaper goods has kept products affordable in a down economy. The flip side is that U.S.-made goods are more expensive here and abroad. Devalue the dollar by comparison, and U.S. products have a better chance to compete, particularly in China.

All internationally made goods become more competitive against a stronger Chinese currency, and that will be well-received in Toronto. The other dynamic is more buying power for China as it looks for resources around the globe.

China’s currency-exchange reforms, as they are called, put the strength of this emerging power in a brighter light. Even the word emerging may no longer truly apply to a country with vast trade surpluses, an eagerness to invest in new technologies and the political dexterity to ameliorate hard feelings before a major world economic summit.

— The Seattle Times