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THE DISASTROUS HISTORY OF CHINA'S PAST ATTEMPTS AT OVERVALUING THE RENMINBI (YUAN)|
The last attempt to overvalue the Yuan occurred just before the TAM Uprising, which was fueled not by government abuse, but by unbridled inflation, caused by an official Yuan/Dollar exchange rate of 3.72 Yuan/Dollar. This took place in 1987 leading into the near-death-experience of the Chinese government from April to June 1989, and lasted to the end of the year. Exports dropped. Imports rose. Factory closings increased. Unemployment increased. The CPI of food and fuel in some places hit 50%, though averaged out 23% nationally. This was the setting created by the clique that wanted to overthrow the Reform Movement of Deng Xiaoping.
History is repeating itself, although inflation is still under control.
Not for long, after the stock market rescue, needed to save the middle class from ruin, who believed in the myth of a market that can only go up and never down.
First, there was the 3 trillion dollars worth of savings that the public lost to the brokers who sold the shares to them, and the banks that lent them the money to buy the shares with at high margin interest rates.
Next, there is the nearly 500 billion dollars worth of new money infused into the stock market by the monetary authorities through a shell intermediary, to make good a portion of the losses of the stock market retail investors, to keep them from total ruin.
Then, there is the 3 trillion dollars worth of foreign loans that Chinese banks and businesses will be transforming into Yuans for domestic use, which while holding up the Yuan exchange rate, also add to the domestic Yuan monetary supply, leading to more Yuans chasing after declining volume of products from China's contracting manufacturing sector.
All these will lead to inflation . . . then comes the strikes, the protests, and the final showdown that will make TAM look like a Sunday picnic, because it will be nationwide, in every city, of every province.