If a Big Mac costs only $1.83 in China, is the yuan too cheap?

The sandwich in China costs half of what it does in the US, according to The Economist's Big Mac index.

Keith Srakocic/AP/File
A Big Mac (pictured here in North Huntingdon, Pa.) costs about $3.58 in the United States, $6.87 in Norway, but only $1.83 in China, according to The Economist's latest Big Mac index. Is that evidence that China's yuan is too cheap?

The Economist has recently released its latest Big Mac Index, where Norway still reigns supreme with the most expensive burger around. When I was in Oslo a few months ago I tried desperately to get my hands on one of these must be better than average, almost $7 burgers, but to no avail. When hunger struck there was no McDonald’s in sight, and I ended up eating at Burger King instead. Clearly not quite the same…

More important than my failed expensive burger eating attempt is what the new rankings show about US-China relations… in particular over the small matter of yuan appreciation. According to the Economist‘s findings, “the yuan is 49% below its fair-value benchmark with the dollar.” Whether that’s enough for Tim Geithner and the US Treasury to label it a currency manipulator this coming mid-April is yet to be seen.

The rankings also show how strong the commodities-backed Australian and Canadian dollars have become. Here are the rest of the top and bottom five Big Mac Index countries with their respective burger prices:

Top 5 – Most Expensive Big Macs
* Norway, $6.87
* Switzerland, $6.16
* Euro area, $4.62
* Canada, $4.06
* Australia, $3.98

Bottom 5 – Least Expensive Big Macs
* Taiwan, $2.36
* Indonesia, $2.28
* Thailand, $2.16
* Malaysia, $2.12
* China, $1.83

See the graphic, complete list, and more details at The Economist’s coverage of how the Big Mac index shows the Chinese yuan is still undervalued.

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