June 21, 2010

China Allows the Yuan to Rise

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Stocks climbed on Monday as China's vow to allow a flexible yuan invigorated optimism in the global recovery and raised the outlook for sales in the long term at U.S. multinationals.

The Indian Rupee and other asian currencies are gaining as well

China's yuan surged the most since its revaluation in 2005, and global markets gained following the surprise weekend announcement by China's central bank that it would allow greater flexibility for the currency.
The Chinese Yuan has strengthened by 0.5% from 6.833 to 6.797 over the weekend

The decision "paves the way for an end to the de facto USD-peg and a move lower in USD/CNY in the weeks and months ahead," said analysts at RBC Capital Markets in a note. They forecast the U.S. dollar could fall to 6.50 yuan by the end of the year.

Just last week (June 14), this site summarized the predictions for the rest of 2010 and for 2011 on China's currency. The move by China appears to signal currency appreciation that is the high side of predictions.

A forecast that I had from January 2010 for China's economy is repeated below.

My last forecast for China's economy was here. Extending out to 2040 would get to about 360 trillion yuan which would be in the range of US$123 trillion.

Year GDP(yuan) GDP growth USD/CNY China GDP China+HK US GDP US Growth
2007 25.8 13 7.3 3.5 3.7 13.8 1.1 Past Germany
2008 31.4 9.6 6.85 4.6 4.8 14.3 -3.1
2009 34.2 8.9 6.83 5.0 5.2 13.9 0.7 Passing Japan
2010 37.6 10 6.5 5.8 6.0 14.0 1.5 Past Japan
2011 41.0 9 6.0 6.8 7.0 14.2 1.9
2012 44.7 9 5.6 8.0 8.2 14.4 2.1
2013 48.7 9 5.1 9.6 9.8 14.7 3
2014 53.1 9 4.7 11.3 11.5 15.2 3
2015 57.9 9 4.2 13.8 14.0 15.6 3
2016 63.1 9 3.8 16.6 16.8 16.1 3 Past USA
2017 68.1 8 3.5 19.5 19.7 16.6 3
2018 73.6 8 3.2 23 23.2 17.1 3
2019 79.5 8 3 26.5 26.8 17.6 3
2020 86 8 3 28.6 28.9 18.1 3
2021 93 8 3 30.9 31.2 18.7 3
2022 100 8 3 33.4 33.7 19.2 3
2023 108 8 3 36.0 36.3 19.8 3
2024 117 8 3 38.9 39.2 20.4 3
2025 126 8 3 42.0 42.3 21.0 3
2026 136 7 3 45.4 45.7 21.6 3
2027 146 7 3 48.6 48.9 22.3 3
2028 156 7 3 52.0 52.3 23.0 3
2029 167 7 3 55.6 55.9 23.6 3
2030 179 7 3 59.5 59.8 24.4 3


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