Is an RMB (yuan) depreciation in the offing?  Michael Pettis, a professor at Peking University’s Guanghua School of Management, where he specializes in Chinese financial markets, noted Monday that President Hu Jintao’s speech at this past weekend’s Politburo meeting leaves some wondering.

According to today’s People’s Daily, besides warning “that the global financial turmoil will make it harder for China to maintain the pace of its economic development in the near future”, [Hu] said, in a widely noted comment, that “with the spread of the global financial crisis, China is losing its competitive edge in the world market as international demand is reduced.”

What exactly does this mean? It is worth noting that this has come in the context of recent RMB weakness. According to a Bloomberg piece today, “China’s yuan fell by the most in seven weeks, three days before U.S. Treasury Secretary Henry Paulson visits Beijing for trade talks, on speculation the central bank wants to weaken the currency to spur the economy.” Meanwhile calls for depreciation of the RMB are getting more common, and more and more commentators are beginning to wonder if we might not see a conscious strategy of RMB depreciation.

The yuan has been somewhat of a ‘safe haven’ these past few months, which in turn has helped cushion other regional ‘proxy’ currencies such as TWD, MYR, and HKD.  But a weakened yuan, likewise, could cause an exodus of capital that would extend into the other Asian economies.