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On August 16th, the Chinese yuan reference rate soared to levels not seen since 1993 – rising to 6.3820 against the US dollar. Not only is this level significant – it's the first time markets have seen this rate since the government unified domestic markets – it's also an indication that Beijing may be ready to allow even more appreciation in the currency.
An appreciating domestic currency can help to alleviate the problem of soaring consumer prices – especially when consumer goods are becoming more and more expensive every month. The current pace of inflation in China right now is running at a 6.5% annualized pace. This is about 1.5-2 times as much as the average pace of inflation among the G7 economies – and almost double the US pace of prices at 3.6%.
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