US-China economics: an update

The situation is changing, apparently. China's current account surplus seems to be declining of late...

1980-2010

2010:Q1-2011:Q3

And the Chinese yuan seems to be appreciating...

Economists at the Peterson Institute for International Economics indicate:

China is still judged undervalued by about 3 percent ... Thus, whereas a year ago we estimated that the renminbi needed to rise 16 percent in real effective terms and 28.5 percent bilaterally against the dollar (in a general realignment to FEERs), the corresponding estimates now are 2.8 and 7.7 percent, respectively. It is entirely possible that future appreciation will bring [China's trade] surplus down to less than 3 percent of GDP. But China still has fast productivity growth in the tradable goods industries, which implies that a process of continuing appreciation is essential to maintain its current account balance at a reasonable level.