So as I was writing the post the other day, it seems that RMB appreciation was already in the works – back to 6.88, and set only to continue going up. Yes half of a percentage point counts as vindicating. Free Exchange has a good take:

Last month, central bank governor Zhou Xiaochun alluded to the potential likelihood of adjustments to the exchange rate in order to prevent a possible export slowdown. Of course, 500 bps will not fundamentally enhance China’s competitiveness against the backdrop of global economic weakness, which has been exacerbated by an unprecedented financial crisis. This move is meant to be used in addition to the fiscal stimuli China has mainly relied upon to generate domestic demand. It is a sensible policy given that the financial system, like financial systems elsewhere, fails to function when enterprises, firms, and consumers are plagued by extreme risk aversion. In my view, a fiscal stimulus alone will do little to alleviate the pain inflicted on many exporters whose competitiveness is being eroded significantly by the strength of the currency.