From the article:
When China Real Time last delved into the valuation of Chinese yuan, economist Arvind Subramanian of the Peterson Institute for International Economics came to a surprising conclusion: The yuan was no longer undervalued. China might be shedding its mercantilist ways, he wrote with a co-author, after analyzing new data on global pricing released by the World Bank.
Nowhere was that conclusion more controversial than in the elegant Massachusetts Avenue home of the Peterson Institute itself in Washington, D.C., where several other scholars have been arguing for years that the yuan is so undervalued that it represents an unfair subsidy for China’s exporters. Fred Bergsten, founding director of the institute and now a scholar there, has even urged the U.S. to sue China at the World Trade Organization over its currency policy. But the only president to take him up on the idea so far is the one in “House of Cards.” (The first president; not the one played by Kevin Spacey.)
“Arvind’s latest analysis is hopelessly simplistic,” Mr. Bergsten wrote to China Real Time. “ [His] empirics are also widely inconsistent,” he complained, saying that the World Bank numbers weren’t really suitable for computing the yuan’s valuation.
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Mr. Subramanian stuck to his guns and his study, saying the yuan was fairly valued and that the PPP numbers are a valid way of estimating a currency’s value. “It provides a relatively objective benchmark for evaluating exchange rates,” he wrote.
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