China’s Weak Currency Is Powering Its Exports

How did China’s world surplus in exports over imports this year has already exceeded $1 trillion? A lot of it has to do with China’s weaken currency.

It takes about 7.1 renminbi to buy a single dollar these days. That weakness has powered China’s exports to remarkable heights.

Before his recent retirement from China’s central bank, Sheng Songcheng was the director general of its financial surveys and statistics department. He was one of the few officials with almost unlimited access to economic data in a country that releases fairly little to the outside world.

“From the perspective of purchasing power parity, the exchange rate wouldn’t be 1 to 7, it might be 1 to 5 or even 1 to 4,” Mr. Sheng said at a finance conference, according to a video recording of the event. “Some have calculated that if the exchange rate truly reflected purchasing power parity, one dollar would exchange for only about 3.5 yuan.”