The Obama administration and many Western policy makers celebrated the recent revaluation of China’s currency as a victory in persuading China to correct its trade imbalance with the rest of the world.
China’s move, however, was not motivated by international trade concerns. Beijing is using currency revaluation as a part of a larger strategy to change from being a producer of low-value-added exports to a leader in high-tech, green production. Coming in the aftermath of other policy changes, revaluation is meant to increase the cost of production, and discourage the old export-processing industries.
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