Hence, no matter what the government says, the market cannot force the country to devalue. The yuan has already experienced de facto devaluation as the government has offered substantial export rebates and other Asian currencies have grown considerably stronger. The government's efforts to stamp out illegal capital outflows are beginning to bear fruit. In a devaluation, Chinese exporters who are dependent on inputs from abroad would suffer. These economic factors mean that China will not be forced to devalue anytime soon.
Devaluation remains largely a political decision.
The country's leadership is particularly anxious as it awaits the 50th anniversary of the foundation of Communist China, on October 1, and the resumption of sovereignty over Macao, on December 20. Premier Zhu is loath to devalue. A number of recent developments, including NATO's bombing of Chinese embassy in Yugoslavia and China's unsuccessful bid to gain WTO membership, have weakened Zhu's political power. He is well aware that his firm and public commitment to maintaining the value of the currency allows for no back pedaling. Hence, any deviation from the declared course would make Zhu more vulnerable politically to his conservative opponents.