Having opined extensively on this topic previously, I will attempt to be brief. My general feeling has always been that appreciation is inevitable, and calls for it were somewhat self-serving and probably detrimental. Regardless, the scale of ensuing changes will of course depend on how fast appreciation occurs. Maoxian projects that the Rmb could reach 5 to the dollar by 2020, which seems a bit conservative, given that 2007-2009 were rather unique in terms of market performance. Though there’s no explicit relationship between equities and currency trades, it seems evident that policy makers use major indices as barometers, and no properly Confucian party apparatchik wants to be behind a yuan revaluation if exports collapse and riots start.

Recent inflation figures probably gave pro-appreciation groups (Ministry of Finance, PBoC) the cover they needed to push this through. I’m less convinced that the move was blatant a nod to G20 as some other commentators believe, though timing was still an issue. Properly Confucian party apparatchiks absolutely do not want to be seen as heeding foreign demands, and the last several weeks have been the only time period in recent memory where there hasn’t been a high-profile meeting with some barbarian global dignitary calling for a yuan revaluation. After the G20 meeting would have been unthinkable,

There’s obviously a a large amount of concern that short-term inflows will rush into China, so much so that authorities will in all likelihood depreciate in order to send a signal. After that, volatility and an upward (downward?) trend to a stronger Rmb.