For anyone watching the EM Markets space, the RMB's rise has been one of the most discussed topics of the year. With economic growth focused on exports, a weaker yuan was integral and the source of much scrutiny from the US. So there has been confusion as to why the government has made moves to strengthen the yuan when economic data has been deteriorating.

The real reason is that saving the exporters is no longer the priority. Exports have been falling and the trade surplus has shrunk, and global demand is still weak. Instead, the government is focusing on investment/capital flows. With a strengthening RMB, flows/hot money is less likely to leave the country and the government is actively courting capital inflows. If they were to let the yuan appreciate now, the amount of investors running for the exits would be unprecedented and cause widespread panic in the market, and stability is their current goal.

I guess I'm an accidental currency speculator, having most of my savings in RMB and the rest in CHF. It is definitely good for those of us who earn RMB, vacations are much cheaper. But imports haven't really fallen accordingly; I will believe it when Apple lowers their prices according to the exchange rate value (they are out of synch now, normally their prices are pretty close + 20% tax).

Spot on. After watching the value inflate over the last 10 years, I left! It's too damn expensive to be in China now. Imported products are ridiculously expensive, too. Wander down to Hanoi just over the border in north Vietnam for a pleasant shock!

Are prices really much better in Hanoi? I mean for imported goods like Levi jeans, Apple computers, cars, shoes (all of which are made in China, but...).

I'm OK with the expenses, I just shop when I'm on holiday in the states.

They certainly aren't at the Lego shop.

Beer, wine and cheese - yeah. Most food - yeah. Hotels - iffy, most people get taken for a ride, but there's good deals I would say are cheaper than China given location and quality. So all in all - yes, it's far cheaper (and far more international!) in my opinion.

Food made locally is cheap in China also. I'm not complaining about restaurant prices, even the good ones that serve western food (and WTF, why are hamburgers in Beijing better than anywhere else?).

Hotels definitely are iffy in China, most people get ripped off. I don't bother holidaying in China, if I want the beach, its like Thailand or Philippines, the values are remarkably good off peak. I haven't tried Vietnam yet, I heard it wasn't really a resort place yet.

Many imported products are subject to 20 or 25% luxury tax, so the problem might not be entirely the RMB's increase.

The question is how this impacts the various countries that trade with China, as well as China's export economy as well.

Then in turn, how will the western markets, both real and financial react, especially in light of the US Fed giving signs of winding down fiscal stimulus?

Yuan is strong because it is manipulated by the government that controls 1.6b people in a global market. But it is not sustainable because the bill printing machine is now obviously out of control.

Wait .. doesn't turning on the bill printing machine weaken a currency instead of strengthening it?

1.344b is not quite 1.6b.

Edit: why the downvote? The population of China is 1.344 billion people. Where does the 1.6 come from?