China is coming under intense pressure from its main trading partners, most notably the US, to allow the renminbi to appreciate more rapidly. US legislators recently passed a bill in the House of Representatives (the lower house of Congress) that would allow the US government to punish countries that manipulate their currencies by imposing tariffs (it is, however, unlikely that the measure will become law). As evidence that the Chinese government manipulates the exchange rate to support exports, critics of China's policies point to the country's rapid accumulation of foreign-exchange reserves-which rose by a record US$194bn in the third quarter of 2010-owing to persistently large current- and capital account surpluses.

The Chinese government is likely to remain highly cautious in the area of exchange-rate policy, and is not expected to bow to foreign pressure for a substantial revaluation. However, it will allow the renminbi to appreciate gradually during the forecast period. Despite the problems that this will cause for exporters, renminbi appreciation is desirable, as it should help to reduce the surpluses on China's capital and current accounts, which are contributing significantly to domestic and global economic imbalances. The average exchange rate in 2010 is estimated at Rmb6.77:US$1, and the renminbi is forecast to appreciate against the US dollar by an average of 3.5% a year in 2011-15.