Watch out. China's prices are rising

[T_i_B]

It's an article from a RW rag but it's still interesting. Make of this what you will.

http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2005/07/25/do2502.xml&sSheet=/portal/2005/07/25/ixportal.html

Be careful what you wish for, Charles Schumer. He is the Democratic senator who has been jumping up and down, accusing the Chinese of foul and unnatural practices and of flooding the world with cheap goods.

Mr Schumer did not like the fact that for 10 years the Chinese had fixed their currency at a low rate to the US dollar. That, he said, was cheating, and if they did not stop he would push a bill through, slapping a 25 per cent tariff on Chinese goods.

Now he has withdrawn his bill and the Chinese have obligingly dismantled the currency peg. The yuan now tracks a basket of currencies. As a result, it has risen by two per cent. If you blinked, you might have missed it, especially if you are used to the sort of wild swings that can occur in currency markets, such as the 20 per cent devaluation of sterling when it was expelled from the exchange rate mechanism in 1992.

In the first instance, the revaluation is political. Let us hope it minimises any embarrassment when President Hu Jintao visits Washington in September. But in the longer term, the signals coming out of Beijing suggest this is the first of many steps towards a flexible exchange rate. If this is true, then it is probably the most significant economic event since the fall of the Berlin Wall.