Author: cestmoi

The argument for a stronger RMB. [Copy link] 中文

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Post time 2010-3-31 15:35:23 |Display all floors
Originally posted by greendragon at 2010-3-31 14:19
Free float of Rmb.....

wow! UK, American, French banks has more capital than China.....
The Rmb would be UP and DOWN to it's disadvantage....
Wait till China gets that US$5 trillion forex rese ...



I don't think it's funny. Your comparison with French or UK banks is not that wise. It has nothing to do with available funds.There is nobody waiting in the wings to destroy the EUR or the ailing GBP but there are mighty groups waiting for just doing this to the CNY. China does not have to wait until it has 5 tr USD but for free covertibility it's not the right time now. After all, we don't need a repeat fo the Asian crisis that pushed some countries to the brink of collapse. The CNY can partially be used for trade with SEA and a few countries in Latin America. That's ok for the time being.

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Post time 2010-3-31 15:38:26 |Display all floors

Reply #57 satsu_jin's post

....the SWAPs are vital to ensure continued flow of COMMODITY and MANUFACTURED products should a sabotage be implemented!

I suffered in 1997, don't want it to happened again!


Green DRagon
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Post time 2010-3-31 16:55:29 |Display all floors
CM,

Actually, it works out to the US's benefit because of the complex relationship this all has with its tax base.
"Justice prevails... evil justice."

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Post time 2010-4-1 00:06:24 |Display all floors

Better than no timeframe.

Originally posted by satsu_jin at 2010-3-31 10:35
Don't hold your breath and don't speculate so much. I remain with what I've said already some time ago. This year we'll see a moderate revaluation of the CNY, perhaps something in the range between 3% to 5%, give it 1 or 2% plus or minus.

As for a freely convertible CNY - my guess is not before 2012/2013.

We'll see who is right and who is wrong....


I think China should widen the exchange rate bandwidth slowly until it can accommodate normal trading activities running up to your proposed timeframe of 2012/2013 after which the RMB will be floated.

As China taps its internal market and invest in resources, a stronger RMB is beneficial to the economy.  Todate, China has been looking at it solely from the micro-economic viewpoint of exports of manufactured goods and investing in USD-denominated bonds and t-notes. I am saying we need to look at it from a macro viewpoint.

And no, SJ, I don't think it's funny either.
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Post time 2010-4-1 00:10:49 |Display all floors

For now, just SEA and Latin America

Originally posted by satsu_jin at 2010-3-31 15:35
...
The CNY can partially be used for trade with SEA and a few countries in Latin America. That's ok for the time being. ...



In the near future, perhaps we can include countries where we buy resources. Again here is where a stronger RMB would be beneficial to us.

Don't be put off by Greendragon, he has his ways, he talks like that all the time...
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Post time 2010-4-1 00:32:12 |Display all floors

Another concern.

Originally posted by satsu_jin at 2010-3-31 15:35
...
There is nobody waiting in the wings to destroy the EUR or the ailing GBP but there are mighty groups waiting for just doing this to the CNY. China does not have to wait until it has 5 tr USD but for free covertibility it's not the right time now. ...



That is going to be a bit of a worry in the forseeable future.

I can actually see that happening.
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Post time 2010-4-1 03:10:07 |Display all floors
First, no country including US has the right to tell other countries to appreciate their currency.

In my view the yuan/dollar "peg" symbolizes the most powerful de facto trade alliance in history.

A strong China is good for the world including US!

But, with the new global trade Dynamic, even China cannot stand alone.

There is no doubt that an increase in the value of the renminbi would help alleviate some of the pressure on the US economy.

China’s economy is overheating as asset bubbles and inflation pressures build, posing a “major risk” to global growth, “Growth below 6% in China is a red alert in 2010.”

Beijing's technocrats are caught in a trap. The rest of the world--with some justification--demands an adjustment of the renminbi, but the Chinese cannot make the adjustment in increments without aggravating bubble conditions. On the other hand, they cannot make the adjustment at one time without causing a shock that would cripple the all-important export sector of the economy.

There is no disagreement in China as to a need for a currency leveling and they have indicated a willingness to do so, at an appropriate time. What the Chinese message has been very clear about of late, is that the west needs to get their own house in order, in particular as regards banking regulation and deficit management.

The Chinese take great pride in their nation being a trade powerhouse and China is pleased to announce that it would run a trade deficit of more than $8 billion this month, something it hasn’t done since April 2004.

One could argue that the renminbi may not be as undervalued as people think.

From this viewpoint, the trade deficit could not have come at a better time because Washington appears to be on the verge of doing something about the renminbi. After two decades of trade deficits with China, (i.e., the last surplus with that country was in the early 1980s), the tide of expert opinion is turning in favor of more pressure.

Up to now, those counseling patience with Beijing have prevailed. But at this moment a new consensus is beginning to emerge.

But before we get carried away by the logic of Grandpa Wen, I can assure you that China has been on a buying spree never before seen in their modern era. Commodities and foreign acquisitions have certainly been front and centre lately as they expand their Global trade footprint.

However, China's overall trade surplus is on an unmistakable downward trajectory.

The trend, which obviously worries Beijing, is a reflection of the declining outlook for exports. Exports plunged 16% last year. Why, then, should China stockpile commodities to create what is called a "record trade deficit"?

One explanation is that Chinese officials think exports will recover this year. After all, Beijing reported export increases in December, January and February.

But Minister Chen himself has indicated that the recent bounce is not so significant. Early this month he said it will probably take two to three years for exports to reach 2008--in other words, pre-crisis--levels. Moreover, the winding down of the government's stimulus program will inevitably reduce demand for raw materials.

Therefore, the restocking of commodities in large quantities at this particular moment may not be in response to internal demand. So the buying spree does not make sense. Perhaps, China is trying to alleviate the potential for new rounds of pressure from the U.S. regarding the value of renminbi.

Beijing, conceivably, could be manufacturing a trade deficit.

What has changed in U.S.--China relations? The U.S. economy has tanked, with China holding more than $2.4 trillion in U.S. Treasuries and other assets, which means the U.S. needs China's cooperation in order to stabilize its economy.

China needs the U.S. export market, investments and technology; America needs the low-cost daily necessities made in China to fill its stores.

The world's monetary and political problems require both countries to take parallel policy paths. Cooperation will continue, and relations will move forward, regardless of periodic conflicts.
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