A crack has opened in China's monolithic resistance to strengthening its undervalued currency. Zhou Xiaochuan, People's Bank of China governor, called the dollar peg an anti-crisis policy which can “sooner or later” be modified.
Letting the renminbi appreciate from its current value of 6.83 per dollar would be good for the world. Not so much because shrinking China's trade surplus would boost global demand much – it amounts to less than half of one per cent of world output – as because it would forestall a resurgence of the cheap credit tsunami that helped to cause the subprime bubble.
But much more importantly, it would be good for China. It is after all absurd that a poor country (national income per capita was some $3,000 last year) should be devoting its human and physical resources to producing gadgets for the enjoyment of consumers elsewhere when ordinary Chinese are not reaping the fruits from this effort. A large part of the proceeds is instead saved and recycled into lending to rich western countries.