Recently the head of China's central bank, Zhou Xiaochuan,made comments that drew less attention than they deserve. FirstGovernor Zhou suggested that market forces would play a bigger rolein setting the value of China's currency, the yuan or renminbi.Then he mused that the yuan should rise further against the dollarand on foreign exchange markets generally.

There is room for two responses to this seemingly new Chineseposition, one cynical and the other much more positive andhopeful.

The cynical view reflects history. China has long strived topromote its exports by keeping its yuan cheap to the dollar andother major currencies. The global pricing advantage this policygave Chinese goods enabled the country famously to raise its shareof global exports from nearly zero in the early 1990s, when itinitiated the policy, to upwards of 12% more recently.

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