If the first goal of China's decision last month to abandon its currency peg to the US dollar was temporarily to blunt international criticism, then it looks like mission accomplished.
While the Canadian summit of the Group of 20 leading nations in late June looked, in the build-up, as if it might turn into a bash-China session, Beijing's announcement the week before that it was changing policy took the issue off the table in Toronto. The administration of Barack Obama, meanwhile, notched up the change of heart as a victory for behind-the-scenes diplomacy. The risk that the currency dispute would descend into a trade war has, for now, disappeared.
Yet how the policy will evolve is much less clear. Two weeks after Beijing ended the dollar peg and adopted a more “flexible” exchange rate policy, the renminbi has appreciated only 0.3 per cent against the dollar. So far the economic impact of the policy shift has been limited.
