Interesting news from China today. On the eve of US president’s visit to this country, People’s Bank of China issued a monetary policy report which outlined possible release Yuan from US Dollar peg.The exact wording was “Following the principles of initiative, controllability and gradualism, with reference to international capital flows and changes in major currencies, we will improve the yuan exchange rate formation mechanism,”. OK, so in reality it is a big maybe, kind of like saying “There is a sliver of a chance for possible un-pegging of Yuan, sometime in the future, as measured by cosmic time unit, if you are lucky”. But it is a start, of sorts and something what US counterparts want to hear.

Delighted US officials responded by saying what the Chinese wanted to hear. During his stop over in Japan,  U.S. Treasury Secretary Timothy Geithner said during news conference “I believe deeply that it’s very important to the United States, that we maintain a strong dollar.” And, since US deficit is under international scrutiny, he added ““we’re going to bring our fiscal position back to a sustainable balance.” I guess if you say something often enough you start believing in it, irrespective of evidence to the contrary. Now, since the visit already accomplished what it intended to do (win some concessions) does it even has to happen? We can just be telling each other these grossly exaggerated half truths and smile nicely, without spending money on silly meetings.
Yuan to appreciate finally?