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A second, less positive interpretation is that the PBOC is weakening the yuan in order to boost Chinese exports.
The Americans are convinced that the Chinese are deliberately holding down the level of the yuan in order to boost exports.
American officials and lawmakers have complained for years that China deeply undervalues its currency, the yuan, in order to increase its exports at the expense of American producers.
Lew has charged China with intentionally undervaluing its currency, the yuan, in order to boost exports, leading the state newswire Xinhua to accuse him of making "fact-twisting and politically misleading remarks".
Moreover, if China is pushing down the yuan in order to goose its exports, its policy will not sit well with its foreign competitors, be they the US or Japan.
If there's a coherent story to be told here, it may be this: because China's economy has been struggling, and its exports in particular have been weak (they fell eight per cent in July), policymakers wanted to devalue the yuan in order to make the nation's products more competitive in the global marketplace.
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The Chinese government says it will move towards a more flexible exchange rate in the medium term, but for the moment it wants to keep the yuan stable in order to support broader economic stability.
Treasury Secretary Henry M. Paulson Jr. has also asserted that China is buying dollars to keep the value of its currency, the yuan, artificially low in order to make its exports cheaper and imports more expensive.
If carry traders are also sneaking money into the country, then the central-bank purchases will be bigger still.The yuan it prints in order to buy these dollars add to China's money supply.
As evidence, China has consistently devalued the yuan in recent years in order to keep its exports cheap.
In theory, if the dollar falls against the other currencies, the People's Bank of China should let the yuan rise against the dollar in order to hold the overall value of the basket steady.
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