The yuan is currently the target of international pressure to be revalued. These pressures originate from the fear that China, given its low production prices, is exporting deflation to the rest of the world. Being based on an undervalued currency, its worldwide market shares would rapidly grow and its power to influence worldwide prices would also be strengthened. To what extent do these arguments justify a change in the Chinese currency's exchange rate, or do they plead in favor of a change in the currency exchange system itself?

Officially, the Yuan is controlled by a `managed floating' system. But in reality, and particularly since the 1997 crisis, it is a pegged system, linking the Chinese currency to the dollar [at the rate of 8.27 CNY/1 USD within a fluctuation band of ±0.003 (for daily movements on the interbank exchange market)]. Initially, the depreciation of the other Asian currencies further to the financial crisis gave rise to fears of a possible overvaluation of the yuan. But the trend was reversed when the Asian currencies grew stronger. However, it is difficult to obtain a clear vision concerning a possible undervaluation of the yuan by separating the economic factors from the political arguments, as the various arguments currently advanced often lack impartiality.

Moreover, China's rapid gains in winning market shares2 (To the detriment of other developing countries such as Mexico), notably in the United States, combined with a fear of worldwide deflation, have increased pressures in favor of the Chinese currency being revalued. China's increasing integration into the world economy is increasing its power to influence world prices. As the Chinese economy was still in a deflation situation, the weakness of its prices seems to designate it as one of the main sources of deflationist pressures. According to the advocates of a revaluation of the yuan, such a move would enable an easing of the downward price pressures affecting certain countries. The dollar's current downward slide and the persistent moroseness of the Japanese economy have accentuated these pressures, particularly on the part of the United States and Japan.

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