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DENG MOVED CHINA FORWARD WITH HISTORIC DEVALUATION FROM 5.74 TO 6.37 IN 1992 [Copy link] 中文

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Post time 2015-1-10 23:14:01 |Display all floors
HISTORICAL LESSON FOR THE YOUNGER GENERATION OF CHINESE MEN AND WOMEN IN CHARGE.

CHINA'S ANNUAL GDP GROWTH RATE WAS A STELLAR 11.0% IN 1988.  THEN, OF COURSE, LIKE THE "OCCUPY CENTRAL", TAM WAS OCCUPIED BY FOREIGN STOOGES, AND CHINA'S ANNUAL GDP GROWTH RATE DROPPED TO 4.1% AND 3.9% FOR 1989 AND 1990.  CHINA DEVALUED THE YUAN FROM 4.94 IN 1989TO 5.74 IN 1991, WHEREUPON THE ANNUAL GDP GROWTH RATE JUMPED FROM 3.9% TO 9.2%.

LEARNING QUICKLY THE NATURE OF THE BEAST, DENG AND HIS HELPERS SEIZED THE MOMENT, AND DEVALUED THE YUAN FROM 5.74 TO 6.37 IN 1992.  REMEMBER THIS NUMBER!  6.37 YUAN/DOLLAR!  

AND THE ANNUAL GDP GROWTH RATE SHOT UP TO A HISTORIC 14.2%, WHICH HE SUSTAINED TO 1993 AT 14.0%.

CHINA MUST BREAK THROUGH THE CHOKEHOLD OF THE PBOC'S EXCHANGE RATE BEING KEPT ARTIFICIALLY OVERVALUED AT LESS THAN 6.30, AND HISTORY HAS PROVEN THAT IF CHINA'S YUAN EXCHANGE RATE BREAKS OUT AT 6.50, ITS ANNUAL GDP GROWTH RATE WILL RECOVER OVERNIGHT, AND ITS FOREIGN CURRENCY RESERVES WILL AGAIN RISE DRAMATICALLY.

MORE IMPORTANTLY, IT WILL END THE ILLEGAL TRANSFER OF ARBITRAGE-FREE FUTURE TRADE REVENUES FROM CHINA TO JAPAN, WHICH HAS ADOPTED A YEN DEVALUATION POLICY IN TANDEM WITH CHINA'S YUAN REVALUATION POLICY.  ON THE SURFACE, THEY MAY LOOK LIKE COINCIDENCES.  IN FINANCE, COINCIDENCES ARE RARE INDEED.

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Post time 2015-1-10 23:49:54 |Display all floors
It was a big mistake peg 1 USD to 8.9 yuan way back in 1993/94 when China was given Most Favor Nation MFN trading status by the US.   The suitable peg should be 5.5 yuan to a US dollar.

If in 1993/94, one bowl of noodle can be kept at 1 yuan, there is no reason to peg 1 USD to 8.9 yuan.

Now China all over have run way inflation where one bowl of noodle is 10 yuan in many places.

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Post time 2015-1-11 00:27:26 |Display all floors
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Post time 2015-1-11 06:34:24 |Display all floors
bushier Post time: 2015-1-10 23:49
It was a big mistake peg 1 USD to 8.9 yuan way back in 1993/94 when China was given Most Favor Natio ...

All extremes lead to a reversal to the mean, exchange rates, likewise.  At an exchange rate of 5.5 yuan/dollar, China was in recession.  At an exchange rate of 8.9 yuan/dollar, China experienced inflation.  But at an exchange rate of 6.37 - 8.28 yuan/dollar, China had neither recession nor inflation, but instead had a robust growth of its economy, with rising GDP year after year, and this is where the PBOC has a duty to peg the Renminbi at, at around 6.50 - 7.50 yuan/dollar exchange rate, and NOT at the current recessionary and deflationary 6.20 yuan/dollar exchange rate.

I challenge any defender of the PBOC to post here a refutation of why the Yuan/Dollar exchange rate should be at 6.50 yuan/dollar.

Come on!!!

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Post time 2015-1-11 23:27:05 |Display all floors
It is better to peg 5.5 yuan to a  US dollar, as long as this can keep one bowl of noodle in China at 1 yuan for 20 years.   As for attracting foreign investor, using tax free incentives, and free land use for 20 years will be more suitable than devaluing yuan to such low levels (eg. 8.9 yuan to 1 USD)

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Post time 2015-1-12 05:39:20 |Display all floors
Uncle Robert Mugabe's Zimbabwean money has now more added-value than my Ugandan shillings since China has should much of their international debts.

Why are the Chinese so kind?

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Post time 2015-1-12 09:34:14 |Display all floors
bushier Post time: 2015-1-11 23:27
It is better to peg 5.5 yuan to a  US dollar, as long as this can keep one bowl of noodle in China a ...

One yuan for a bowl of noodle is very expensive when the average disposable income per person in China was 343 yuans, at the start of the economic reforms in 1978, that is 1.05% of your daily disposable income.  In contrast 10 yuans for a bowl of noodle in 2014, after the economic reforms of Deng, when the per capita disposable income is 27,000 yuans, is 0.13% of your daily disposable income.

In short, speaking of the price of a bowl of noodle, the average Chinese can consume 8 bowls of noodle instead of 1 bowl of noodle.

In 1992, the Renminbi's exchange rate was 5.5 yuan/dollar and its annual GDP growth rate was 9.0%, but Japan has since massively devalued its currency, and therefore, China needs to find a new equilibrium point for growth of its GDP and its foreign currency reserves, and that can only be achieved empirically, as the gradual revaluation of the Yuan has proven in the past four and a half years, since June 2010.  The new equilibrium of ZERO GROWTH of the GDP of China is 6.15 yuan/dollar, and the new equilibrium of SUSTAINABLE GROWTH of the GDP of China is at 6.50 yuan/dollar.

China should aim for SUSTAINABLE GROWTH rather than ZERO GROWTH.

AND THE PBOC SHOULD BE PROHIBITED FROM BUYING YUANS WITH HARD-EARNED DOLLARS UNTIL THE YUAN EXCHANGE RATE EXCEEDS 7.00 YUANS/DOLLAR.



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