Quote Originally Posted by touchring View Post
China is in very a vulnerable position.

Technically speaking, the country is still in civil war, Taiwan versus the PRC. Parts of the PRC are also threatening to break away, Xinjiang, Tibet.

Revaluing the yuan at this point is still too risky.
Here's the Bloomberg article on the same topic...

Wen Rebuffs Yuan Calls, Says He's ‘Worried’ About Dollar (Update1)

March 14 (Bloomberg) -- Chinese Premier Wen Jiabao rebuffed calls for the yuan to appreciate and sought assurances that the U.S. will protect the value of China’s dollar assets.

“I don’t think the yuan is undervalued,” Wen said at a press conference in Beijing marking the end of China’s annual parliamentary meetings. Dollar volatility is a “big” concern and “I’m still worried” about China’s U.S. currency holdings, he said.

Wen urged America to “take concrete steps to reassure investors” about the safety of dollar assets, repeating concerns that he expressed a year ago...

...Wen’s comments come as lawmakers in the U.S. call for retaliatory trade measures to compel appreciation. On March 11, President Barack Obama urged the nation to move toward a more “market-oriented exchange rate.” Economist Paul Krugman said March 12 that global growth would be about 1.5 percentage points higher if China stopped restraining the value of its currency and running trade surpluses.

“This is a sign that there will be no one-off revaluation in coming months,” said Lu Ting, an economist at Bank of America-Merrill Lynch in Hong Kong. “China’s top policymakers do have their own currency reform plans but coercion from other countries will do disservice to this cause.”...

...He echoed central bank Governor Zhou Xiaochuan in saying that China needs to carefully time any exit from anti-crisis policies, which have included pegging the yuan to the dollar since July 2008.

Sovereign-debt problems and high unemployment around the world could send the global economy into a second, or “double dip” downturn, the premier said. In China, inflation, combined with wide income gaps and official corruption, could lead to social instability “and even affect the government’s hold on power.”

Wen reiterated that the nation will keep the yuan “basically stable” and maintain a moderately loose monetary policy and a proactive fiscal stance to consolidate an economic recovery, adding that it’s “essential” for the timing of any change to be appropriate...