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Why China Should Keep The Yuan Undervalued

|Includes: Market Vectors Chinese Renminbi/USD ETN (CNY)

A continuation of my analysis of the yuan:

China should focus on maintaining the previous status quo of manipulating its currency to ensure it continues its export advantage. This is because, for now, the maintaining of significant growth in China's economy should be its number one priority. The Chinese government is currently in the midst of a huge transition of power in the Communist party, and there have been numerous cases, such as the brazen escape of Chen Guangcheng and the scandal surrounding Bo Xilai, of significant civil unrest. The last development the Chinese government needs is a slowing economy. This is because the opiate of the Chinese masses is economic prosperity; as long as standards of living continue to grow, the majority of the Chinese population will accept the forsaking of some basic human rights. Yet, China's economy is showing signs of sputtering. In fact, it may be on track to grow at its slowest pace in a decade and recent economic data, such as growth in industrial output, were much lower than economists expected. Thus, in order to ensure continued economic prosperity to appease its populace, it is in the best interests of the Chinese government to utilize every mechanism in its repertoire, including keeping its currency artificially low.

In other news, the U.S. declines to name China a currency manipulator.