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This post was edited by abramicus at 2014-9-7 05:19|
jordan_c_fan Post time: 2014-9-3 17:09
When you are using the word "garbage" as a personal attack meaning you had already lost the argume ...
Since you repeated your argument twice, it deserves a straight answer at least once.
You argue that by raising the value of the Yuan, China can afford more foreign products that it needs. I say, NO.
No, because foreign products are priced in US dollars. No matter what exchange rate the Yuan is pegged at on any day, the price in US dollars is the same. While it may make an individual buyer pay less Yuans, he has to obtain the same dollars from the PBOC, whether the exchange value of the Yuan is high or low.
Therefore, to China, as a country, whose monetary authority is represented by the PBOC, what China pays, which is in dollars, is exactly the same whatever the Yuan exchange rate is.
A ring that costs $1,000 US dollars will cost China exactly $1,000 US dollars whether the Yuan/Dollar exchange rate is 6.00 or 7.00. Making the exchange rate 6.00 Yuan/dollar only means a Chinese individual has to pay the PBOC only 6,000 Yuans in order to get the 1,000 Dollars to buy the ring with. If the Yuan/dollar exchange rate is 7.00 Yuan/Dollar, then he has to pay 7,000 Yuans. But CHINA PAYS THE SAME $1,000 US DOLLARS to finance the deal. Making the Yuan revalue upwards only depletes China's foreign currency reserves faster, but it does not enable China to buy more things with the same dollars.
The fallacy is in confusing what an individual Chinese purchaser has to pay in Yuans, with what China as a country has to pay with its dollars. The former is less, but the latter is exactly unchanged.
However, the effect of an overvalued Yuan is that foreigners selling their products for the same dollars can price their products cheaper in Yuans inside China's own domestic market, while Chinese manufacturere selling their products in the international market in Yuans have to price them higher than foreign products in dollars, which in effect shrinks their DOMESTIC and FOREIGN MARKET SHARES.
The net result is that China gains nothing from its public buying foreign goods using up its dollar reserves, but loses its market share in the domestic economy and in the global economy, killing its own manufacturing sector. To gain nothing, and in exchange, lose everything is not genius. It is not advanced economics. It is TREASON.