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Timothy Geithner is still talking in Davos (previous) - now moving on to China and the...

Timothy Geithner is still talking in Davos (previous) - now moving on to China and the "formidable challenge" posed by the artificially-low yuan. He maintains that it's critical to get China to move on the exchange rate and "dialing back subsidies."
Comments (6)
  • Critical for who. Probably not China.
    27 Jan 2012, 10:23 AM Reply Like
  • Good luck.
    27 Jan 2012, 01:22 PM Reply Like
  • China has been raising the RMB gradually and has been trying to slow inflation and real estate bubbles. There is only so much it can do at once. Their major issue is that manufacturing is now starting to leave them and go to SE Asia who will be the real beneficiaries of a higher Yuan, not the US unless we are willing to accept paying $1-2 an hour for blue collar work with no benefits.
    27 Jan 2012, 01:25 PM Reply Like
  • "SE Asia who will be the real beneficiaries of a higher Yuan, not the US"

     

    This is only partially true. It's not just about salaries and benefits. One of America's main advantages is its logistical superiority, which can make some of the manufacturing worth doing here. I'm not saying that all of those jobs will return, but some certainly will. Even if those jobs were moved to Mexico, it would still indirectly benefit the US.

     

    If China appreciates its currency by 25-40%, other emerging countries (India, Vietnam, Indonesia, Malaysia, etc.) will be forced to do the same because of inflationary pressures. In all likelihood, the dollar would depreciate against these currencies as well. In the end, I think we'd see companies taking a more balanced approach, which would mean keeping more of their operations at home.
    27 Jan 2012, 04:56 PM Reply Like
  • Why don't ya walk over the White House and get He Who Must Not Be Middle Named to cut subsidies to ethanol, wind, solar panels and high speed rail?
    27 Jan 2012, 03:37 PM Reply Like
  • As with the yen in the 70s and 80s, the real problem isn't an undervalued currency. That's a proxy for the real problem, which is China's ultra-high savings rate, the highest ever recorded. China has added massively to global supply. What's missing is a corresponding growth in consumption and import demand.
    27 Jan 2012, 05:37 PM Reply Like
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