Regarding the trade deficit of PRC to other ASEAN countries, how much of that is due to import of semi-finished products/components for final assembly and reexport versus for internal consumption in China?
A lot of companies manufacture their core components outside China, but use the Chinese factories for the final assembly and testing. A part of the reason is that the final assembly and testing is relatively more labor intensive than near automated manufacturing of components. Another part is to protect the core IP of the company since once the IP ends up in China it is sooner or later going to get cloned locally.
The INR had a lot of restrictions on conversions till the early 90s and was not a free floating currency; there were many controls even in terms of how much INR could be converted to foreign exchange. You could not exchange more than $500 if you were travelling abroad!
During the early 90s those curbs were removed and the INR found its natural range. The depreciation of the INR helped fuel the Indian export industry; and the INR tracks the current account deficit reasonably well.
As pointed by others, the Chinese Yuan is unique because it depreciated while PRC was running huge surpluses! The laws of economics reverse with it.
Incidentally, due to the tight peg of the Yuan, it is not the best metric of what is going on.
From the Pritchard article included earlier.
"There is so much spare capacity that they will start dumping goods, risking a deflation shock for the rest of the world. It no surpise that China has just imposed tariffs on imports of GM cars. I think it is highly likely that China will devalue the yuan next year, risking a trade war," he said.
China's $3.2 trillion foreign reserves have been falling for three months despite the trade surplus. Hot money is flowing out of the country. "One-way capital inflow or one-way bets on a yuan rise have become history. Our foreign reserves are basically falling every day," said Li Yang, a former central bank rate-setter.
The reserve loss acts as a form of monetary tightening, exactly the opposite of the effect during the boom. The reserves cannot be tapped to prop up China's internal banking system. To do so would mean repatriating the money – now in US Treasuries and European bonds – pushing up the yuan at the worst moment.
There is also not a 1:1 relationship between current accounts surplus and an appreciating currency. Germany and the Middle East states also have a very strong surplus and weak currencies, but no one accusing them of manipulation. If a tree falls in the forest and no one hears, does it not make a sound ?? If a country depreciates its currency at almost twice the rate of China and no one gives 2 S's, is it not a currency manipulator??
And your definition of currency manipulation is right out of the PRC circulars. When did Germany have its own currency in this century??
The RBI does not set the band for the INR. It floats freely based on the context of current capital controls. OTOH, the PRC explicitly sets the exchange rate for the Yuan in a band which is completely artificial and not market driven. The RBI in fact has been accused of being too lethargic in intervening in the Forex market; they try to be as hands off as possible.
In fact the INR tends to track the global economy quite well. The chart below shows INR.USD vs the SPY. While the scales are different, the fractals are almost identical.https://www.google.com/finance?chdnp=1& ... USD&ntsp=0
Compare it to that of the Yuan which seems immune to what is happening to the rest of the world because it is so heavily manipulated.https://www.google.com/finance?chdnp=1& ... CNY&ntsp=0