Author: abramicus

WIDENING GAP BETWEEN OFFICIAL STATS ON CHINA PMI AND REALITY [Copy link] 中文

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Post time 2013-8-7 12:27:04 |Display all floors
This post was edited by abramicus at 2013-8-7 12:36

It is true that China's manufacturing is geared towards civilian use and production, with only a small part devoted to making weapons, but even this peaceful endeavor is facing an uphill battle right now, not because of western competition against Chinese products, but because of its own central bank's policy of raising the exchange rate of the yuan to the point that Chinese products are overpriced in dollars, automatically through the central bank's policies, not thru the producers wanting to raise their prices, abroad and at home.  This is why this gaping hole in China's current economic policy is so difficult for the Chinese manufacturers to understand.  Why is the central bank killing off their markets in civilian goods that no foreign country could compete in?

What is the fair market value of the yuan?  It is like asking the farmer, what is the fair market of his corn.  It is not the price that the farmer is willing to buy back his corn with his own savings in dollars, which is what the Chinese central bank is doing - buying back Yuans by selling its Dollars, at 6.17 yuans per dollar.  It is the price that the consumers are willing to buy the corn using their savings in dollars!  In short, the fair market value of the yuan is what foreigners are willing to pay for the yuans in their dollars.  And you know, they want more than 6.17 yuans for every one dollar they pay.  So, why should the People's Bank of China ask for only 6.17 yuan for every one dollar it pays out of its foreign reserve?  Furthermore, why is the People's Bank of China on the wrong end of the business?  Should not the farmer be selling corn, instead of buying it?  Why is China buying its own corn/yuan?  Go figure that out.  These economics professors know the equations, but lack common sense in applying them.  In this case, they are applying the equations in the WRONG DIRECTION!


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Post time 2013-8-7 12:37:55 |Display all floors
abramicus Post time: 2013-8-6 20:27
It is true that China's manufacturing is geared towards civilian use and production, with only a sma ...

Why would China want to limit itself to printing more money as western economies do?
This is an old capitalist trick to pay the workers with fiat money while the real value of the nation
is continually transferred to the few wealthy people that in effect end up owning the nation.
China realizes that the west will not honor its debts so why bother worrying about exchange rates?
China has exhausted the temporary benefits the capitalist phase and is now entering the socialist
phase of communism. No need to work so hard to make economics seem hard. It's really very easy.
If capitalism promotes innovation and creativity then why aren't scientists and artists the richest people in a capitalist nation?

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Post time 2013-8-13 14:40:52 |Display all floors
This post was edited by abramicus at 2013-8-13 14:43
robert237 Post time: 2013-8-7 12:37
Why would China want to limit itself to printing more money as western economies do?
This is an ol ...

The slowdown in China's GDP growth rate affects every phase of China's economic development using any model.  GDP is just a number that includes everything being done of any marketable value in China.  All countries, communist or capitalistic, or mixed, has to have a number to gauge whether it is producing more, or less, from year to year.  The shadow trailing this number is that of other gauges of economic decline, such as overcrowding, crime, prostitution, and eventually, foreign interference and invasion as central political authority crumbles in the midst of popular discontent and anger.

China is already way ahead of any model economists have tried to fix her to, until recently, when a bunch of "educated" apparatchiks tried to make China do its capitalism with western characteristics and used its hidden levers to actually undermine the Chinese economy, not aid it.

The hidden lever is that of pegging the Yuan to a higher exchange rate that causes domestic, not just overseas, prices of Chinese products to be OVERPRICED relative to foreign products (to readers unaccustomed to the inverted terminology of exchange rates that is probably designed to confuse the average person, a higher exchange rate for the Yuan is quoted as a smaller number, such that the current exchange rate of 6.12 is actually higher than 7.00, and the unit of comparison, USD/CNY, is a total contradiction, because 6.12 is the ratio of CNY or Yuans to USD or dollars, and therefore, 6.12 should actually be denominated in CNY/USD).

This twin pincer movement of the Yuan OVERVALUATION is killing off Chinese manufacturing, even at home, not really improving domestic production.  Any increase in domestic consumption is likely to occur at the expense of domestic production, and this will eventually lead to China becoming dependent on foreign production to satisfy its domestic consumption.  But developed countries will do so only as long as China has a large foreign currency exchange to draw from in purchasing their goods.  They will not acccept Chinese fiat currency as payment.  The next phase after China's foreign currency reserve dries up is that prices will then spike up, as foreign imports become more and more expensive, while domestic products continue to be overpriced relative to foreign imports, leading to inflation.

This is how the Chinese economic juggernaut is going to be dismantled.

From within, by the PBOC pegging the YUAN to an exchange rate that makes China's products too expensive to buy abroad in dollars, and too expensive to buy  at home in yuans.

This  is HIGH TREASON, because it also finances the revival of the Japanese Wehrmacht, just as the reparations of 200 million taels of silver that China paid to Japan under the Treaty of Shimonoseki of 1895 underwrote the military buildup of Japan in the early 20th Century.

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Post time 2013-8-13 14:52:13 |Display all floors
CHINA EXPORTS DROPPED 3.1% IN JUNE, WHILE IMPORTS DROPPED ONLY 0.7%, CONFIRMING THE EFFECT OF THE OVERVALUED YUAN STRANGLING CHINESE MANUFACTURING ABROAD AND AT HOME.

For the fourth straight month, China's exports to US and EU declined, while the drop in imports mainly came from dropping commodity prices resulting from a sudden rise in inventory of commodities as Chnese manufacturing slowed in purchasing them.

This abysmal economic performance of the new economic team is appalling and shameful, in the face of the stellar acheivements of Deng, Jiang and Hu.  The main difference is the PBOC is now totally out of control in strangling Chinese manufacturing by unilaterally buying up yuans with more and more dollars taken out of the Chinese foreign currency reserve, which further impoverishes China's savings, while reducing China's earnings.  If this is not TREASON, what is?

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Post time 2013-8-15 14:24:20 |Display all floors
THE REFUSAL OF THE PEOPLE'S BANK OF CHINA TO DEFEND CHINA'S MANUFACTURING SECTOR AND PROTECT CHINA'S FOREIGN CURRENCY RESERVE FROM LOOTING BY THE JAPANESE, THROUGH COMPETITIVE DEVALUATION OF THE YUAN AGAINST THE YEN . . .

is like the refusal of Wu Sangui to defend Shan Hai Guan and allowing the Manchu's to take over Beijing and thence China

is like the refusal of Li Hongzhang to defend Korea and Weihaiwei, allowing the Japanese to take over Korea and eventually, all of Manchuria as well.

China is being looted by the billions by the Japanese when the Yuan is not competitively devalued to protect China's foreign and domestic market share, and when its hard earned dollars in its foreign currency reserve is being given away generously with a greater than 35% bonus to foreign investors repatriating their earnings back to Japan.  

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Post time 2013-8-15 15:07:53 |Display all floors
robert237 Post time: 2013-8-7 12:21
China has a huge advantage over western economies in that they haven't spent the past half century
k ...

Yes they have a huge advantage - they can manipulate.

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Post time 2013-8-15 15:11:01 |Display all floors
robert237 Post time: 2013-8-7 12:21
China has a huge advantage over western economies in that they haven't spent the past half century
k ...

Yes they have a huge advantage - they can manipulate.

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