Question: How would a change in the way Chinese Currency is valued against USD affect the performance of Chinese stocks? 

Answer: Yes, and it is doing so at the moment. In July 2005, the Chinese government relaxed trading controls on the Chinese yuan, prior to this US$1= Y8.25, now today US$1=Y8.04 (a net decrease of 2½%). \n\nAs a result of this the main Chinese stock exchange (The Shanghai Composite) has rallied from 1,060 to 1,250 (17.9%) compared to the Dow Jones Industrial Average (which has increased from 10,390 to 11,021 in the same time frame (+6.1%)). So it would appear that the loosing of controls on the yuan has benefited Chinese stocks, but that those gains are tempered by the lack of performance in the US
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