Asia is overpricing risk (update 2) - PboC now pricing in export collapse. CNY will drop, US/CHINA trade war coming soon...

"BEIJING--If China's export juggernaut falters, the country's central bank will allow its renminbi currency to fall against the U.S. dollar, thereby making Chinese goods cheaper overseas, a key monetary adviser here said.

Zhou Qiren, a member of the Monetary Policy Committee, an advisory body to the People's Bank of China, also told The Asahi Shimbun in an interview that Beijing's announcement June 19 that it would allow the renminbi to fluctuate more flexibly against the greenback starting June 21 should have been made much earlier.

Zhou said having a fixed exchange rate with the dollar over the past two years had been a burden for China.

The best way for China to reverse a sharp fall in exports would be to allow its currency to fall in value, too, he added.

No sooner had China announced its new policy than the renminbi began to rise in value against the dollar. In recent days, however, the rate has remained almost at the same level.

At the close of inter-bank trading on the Shanghai foreign exchange market Monday, the renminbi traded at 6.7780 yuan against the dollar, only up 0.71 percent since the June 19 announcement.

Chinese exports to both the United States and Europe had been surging until June. But there is now concern that exports will start falling"

from asahi.com Jul 21 2010