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The current round of renminbi appreciation was announced on June 21, 2010. Since then, over three hundred trading days have passed and the currency has steadily ticked upwards against the dollar. Indeed, the renminbi appears to be moving relatively quickly when compared to the previous round appreciation that began on July 21, 2005.
The current round has led to a more than 6.8% appreciation, compared to less than 5% for the previous round over an equivalent time period. The renminbi has gained around 3.6% since the beginning of the year and looks like it will continue to appreciate modestly in the second half of 2011.
While nominal appreciation versus the dollar is a hopeful sign, a more comprehensive way to look at the renminbi's value is to use a real effective exchange rate (REER). The REER adjusts for relative price differences between countries and measures a currency against a weighted basket of the currencies of its major trade partners. If China is going to rebalance its economy, the renminbi will need to appreciate relative to all China's major trade partners, not just the United States.
What does REER say about the renminbi's pace of appreciation? According to the JP Morgan Real Trade Weighted Rate, the renminbi has actually depreciated by 1.6% since June 2010. Compare that to a 2.4% appreciation over the same amount of time during the last round of appreciation.
So while bilaterally the renminbi may be appreciating, globally it is actually depreciating. This is not encouraging news for China's rebalancing efforts.