The Renminbi Can Appreciate Significantly

Source: "Hong Kong Economic Journal"
It is reported that the renminbi has substantial room for appreciation. Here are two simple examples: The exchange rate between the Hong Kong dollar and the US dollar is pegged, and all Hong Kong residents know that shopping and consumption prices in Shenzhen are at least half the price compared to Hong Kong. The Economist from the UK occasionally publishes the "Big Mac Index" of various countries’ currencies against the US dollar. A McDonald’s Big Mac sells for $5.69 in the United States, but only 22.6 yuan renminbi (about $3.18) in China. This means the renminbi exchange rate would need to be close to 4 to 1 against the US dollar to achieve purchasing power parity, indicating that the renminbi is undervalued by about 44%. Of course, the "Big Mac Index" is a somewhat humorous and rough estimate. The International Monetary Fund (IMF) officially estimates the renminbi purchasing power parity index at 2.04, meaning the renminbi is undervalued by about 50% against the US dollar. Although academia has various opinions on how much the renminbi’s exchange rate reflects its true value, there is no doubt that the gap between it and purchasing power is the most significant among the world’s major currencies. In 2024,