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02 Dec 09

China's currency: A yuan-sided argument | The Economist

Pressure is on China to revalue the RMB, but it's unlikely to happen anytime soon. Why? Read to find out...

www.economist.com/...displaystory.cfm - Preview

exchange rates China marshall lerner condition trade trade deficit current account

China allowed the yuan to rise by 21% against the dollar in the three years to July 2008, but since then it has more or less kept the rate fixed. As a result, the yuan’s trade-weighted value has been dragged down this year by the sickly dollar, while many other currencies have soared. Since March the Brazilian real and the South Korean won have gained 42% and 36% respectively against the yuan, seriously eroding those countries’ competitiveness.
exchange-rate policy is decided by the State Council, not the central bank. And many policymakers, notably in the Ministry of Commerce, do not favour a revaluation right now.
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- “We don’t think that it’s good for the world economic recovery, and it is also unfair, that you ask others to appreciate while you depreciate your own currency,” said a spokesman for the Ministry of Commerce on November 16th. The previous day Liu Mingkang, China’s chief banking regulator, blasted Washington for its low interest rates and for the falling dollar, which, he claimed, was encouraging a dollar carry trade and global asset-price bubbles.
  - China's accusing the US of devaluing the US$ through low interest rates! How the times are changing! - on 2009-12-02
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- Some Chinese economists warn that the benefits to America from yuan revaluation are much exaggerated. In particular, a stronger yuan would not significantly reduce America’s trade deficit. There is little overlap between American and Chinese production, so American goods cannot replace Chinese imports. Instead, consumers would simply end up paying more for imports either from China or other producers, such as Vietnam. This would be like imposing a tax on American consumers.

03 Nov 09

FT.com / Asia-Pacific - Renminbi at heart of trade imbalances

This article talks about the weak RMB and how it affects trade between the US, China and Europe

www.ft.com/...d9-11de-8ba8-00144feab49a.html - Preview

China currency exchange rates trade

The Americans get the toys, the Chinese get the Treasuries and we get screwed.” Thus a European Union official once characterised the pattern of Beijing accumulating US assets by selling renminbis for dollars, while nothing stood in the way of a rapid and destabilising appreciation of the euro.
A string of countries including Thailand, Malaysia and South Korea have intervened either verbally or in the foreign exchange markets in recent weeks to slow the rise of their currencies.
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- Mr Lyons says that the east Asians are wary of allowing the same to happen to them. “There is a concern that if they let the exchange rate rise, it will attract a lot of hot money but hit confidence,” he says