Author: cestmoi

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

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Post time 2010-3-26 07:23:03 |Display all floors

Another one... :(

Originally posted by Karma2U at 2010-3-26 06:43
China buys dollar denominated assets including treasury bills not as an investment but to keep the value of the dollar high relative to its own currency to suit its export markets.

Thats simple  ...


That is only one reason why China buys t-notes and you have just regurgitated to me what I am trying to explain.

Read first, then think and then, maybe, talk.
Let the dice fly high

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Post time 2010-3-26 12:57:58 |Display all floors

Reply #1 cestmoi's post

....is China flooding the world with RMB, buying up US$ in the capital market, flooding the market with RMB?

I thought the big FOREX reserves in China comes from export proceeds, and net direct foreign investments!
You make it seems that China actually flooding the INTERNATIONAL CAPITAL market with RMB.
I thought the RMB is not a freely tradeable (convertible) currency outside China?

please explain your post!


Green DRagon
Game Master

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Post time 2010-3-26 13:23:05 |Display all floors
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Post time 2010-3-26 13:25:29 |Display all floors
China should stand her ground and learn what the West will do.

The more China give, the more the West will demand.

This is how the West works.

The West has no consideration of reason. The West has not a shred of concern for the well-being of China or her people.

Chinese yuan has already rizen by 20%. They West does not even talk about it.

The West see this as China is weak. So they are going to ask for more more more until China is destoryed.

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Post time 2010-3-26 17:53:18 |Display all floors
If the RMB moves, the PBoC will realize a loss instantly because the value of its dollar assets will fall in RMB terms but its liabilities will have the same nominal value. The PBoC finances dollar purchases by issuing RMB-denominated securities in China. If the PBoC cannot take the opposite position of the RMB, it simply can't meet its obligations and becomes insolvent.

In order to appreciate the RMB without creating this problem, China has to raise taxes implicitly or explicitly to recapitalize the PBoC or issue it additional RMB by fiat. The final equation will shake out the same, but China realizes a loss on this immediately.

The only hope for the PBoC to remain solvent under appreciation is for it to sell bonds into a high demand market. Every day they don't do so, however, increases the risk that they miss out on the current situation where bonds are sold near par and hence losses are near zero. If the demand for Treasuries eases without China moving, it will be too late and the PBoC will have to be recapitalized.
"Justice prevails... evil justice."

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Post time 2010-3-26 18:16:48 |Display all floors
In any case, the simplest thing for China to do both politically and economically, is allow domestic inflation to wipe out the currency difference by increasing the RMB cost of everything in China.
"Justice prevails... evil justice."

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Post time 2010-3-26 18:19:05 |Display all floors

interesting viewpoint

Originally posted by interesting at 2010-3-26 19:46
In any case, the simplest thing for China to do both politically and economically, is allow domestic inflation to wipe out the currency difference by increasing the RMB cost of everything in China.


that might induce food riots, unless there are "iron rations"
(beast ex machina)

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