An even-handed analysis of the RMB revaluation from the Financial Times, syndicated on Yahoo: Making sense of China's choice

Excerpt:

The initial step, a 2 per cent revaluation against the dollar, is of primarily political importance. China is signalling that it is willing to accept the system responsibilities that come with being a leading member of the world economy.

Beijing evidently hopes this will ease protectionist pressure in the US, above all in Congress, at a time when the CNOOC/Unocal bid is hanging in the balance, and Chinese president Hu Jintao is preparing for a visit to Washington. Whether it is enough to achieve this object remains to be seen.

The economic significance of the 2 per cent revaluation is very small. It will not make any difference to the US current account deficit or broader global imbalances. Most estimates suggest the renminbi is at least 15-30 per cent undervalued on current policies.

All attention, therefore, should focus on the new currency regime. By switching to an adjustable peg system Chinese policymakers have given themselves maximum flexibility. But from here the path forks...