Is it just me or did Secretary Geithner just talk out of the other side of his mouth? Thursday he wrote an Op-Ed in the Wall Street Journal with two Asian leaders to mark a big meeting of APEC (Asian Pacific Economic Cooperation) in Singapore.

The WSJ article started out with a bunch of diplomatic niceties about how everyone was working together and must continue to do so, so that all may prosper.

Ahead of Obama’s visit to China, the markets have been abuzz with a statement from the People's Bank of China that it will consider “changes in international capital flows and the trends of major currencies”. This is a departure from the broken record mantra of keeping its currency “basically stable at a reasonable and balanced level”. These statements have created speculation that China is ready to either revalue the RMB upwards or allow it to float.

Analysts have said for years that China will start to move when it is ready. So why now?

The WisdomTree Chinese Yuan Fund (CYB) has been waiting for a day like November 11, 2009. Rather than continue pegging its currency to the U.S. dollar ad infinitum, China’s Central Bank announced “Following the principles of initiative, controllability and gradualism, with reference to international capital flows and changes in major currencies, we will improve the yuan exchange-rate formation mechanism.”

Translation? The Chinese aren’t willing to let their currency go down with the dollar ship.

Mercantilism is alive and well in China this article reveals. China is now the world’s third largest economy although well down the leader board in per capita terms. Chinese monthly economic figures for exports, industrial production, and investment will be reported today.

A massive three-dimensional policy stimulus from low interest rates, deficit fiscal spending and intervention to maintain a highly undervalued yuan has the Chinese economy revving back to pre-global downturn speeds in a hurry. Re-pegged against the dollar since July 2008 at roughly 6.83, the yuan has followed the greenback southward in 2009 against almost all other world currencies. The last thing the global adjustment process needs is for the biggest surplus economy to have a depreciating currency.

The use of the Chinese yuan in China's neighbouring countries for transactions has been growing in recent years. Today the yuan is informally freely convertible in almost all countries bordering China.

The Wall Street Journal printed a trifecta of articles Monday that seem to cry out for the dollar to lift its head out of the sludge. Coincidentally (or not), the dollar rallied for its biggest one-day gain in almost three weeks.

In “Uncertainty May Help Dollar“, analysts remind us that the economic recovery remains fragile and monetary policies have become more uncertain:

Here's an excellent example of 'spin' deflecting what really should be the story of the moment - how other Asian economies have been given a free ride off the dollar's strength in the face of a global meltdown.

On October 15, rather than combat Chinese currency manipulations, Treasury Secretary Timothy Geithner issued a ludicrous report to Congress which claimed that China is not manipulating its currency. It concluded:

[This] report must consider whether any foreign economy manipulates its rate of exchange against the U.S. dollar to prevent effective balance of payments adjustments or to gain unfair competitive advantage in international trade. For the period covered in this Report, January 1, 2009 to June 30, 2009, Treasury has concluded that no major trading partner of the United States met the standards identified in Section 3004 of the Act. (p. 3)

America is currently experiencing the persistent economic depression that comes to countries who let their trading partners practice mercantilism, the strategy of maximizing exports and minimizing imports in order to run trade surpluses.

A strong recovery in U.S. as well as China is an important factor in restoring the global confidence and also for spurring up global trade activity. This article looks into the key economic indicators of China and what kind of recovery do they point towards.

Monitoring Signals of Macro-Economic Climate Index

As ETFs become increasingly sophisticated and target new and interesting markets with unique strategies, it’s growing more and more important to understand the differences between them.

A case in point: while both WisdomTree Dreyfus Chinese Yuan Fund (NYSEArca: CYB) and United States Natural Gas (NYSEArca: UNG) use forward contracts, they differ in how they work.

Earlier Wednesday I wrote a post featuring comments by Marc Faber as I like to do from time to time. In this particular case Dr. Faber was waxing prosaically about an eventual bankruptcy of the U.S. government. His money quote was:

Next station is when the U.S. government goes bust.

The Dow Jones Index Average (DJIA) closed above 10,000 yesterday. Unfortunately, hardly any American understands the reasons for the increase and bounce off the March lows.

Most DJIA companies receive at least half of their revenues from abroad. Coca Cola (KO), McDonald's (MCD), Procter and Gamble (PG) have been expanding overseas for decades. Even Wal-Mart (WMT)--unfairly stereotyped as a rural, "red state" store--has been expanding aggressively in Mexico, the U.K., and the EU.

By Hao Jin

China's rapid economic growth will be the global story of the foreseeable future. Like the Japanese in 1980s, the Chinese are shopping for Hummers, IBM (IBM) PC's, natural resources and real estate, etc.

J. Paul Getty once said:

If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem.

China's rapid economic growth will be the global story of the foreseeable future. Like the Japanese in 1980s, the Chinese are shopping for Hummers, IBM PCs, natural resources and real estate.

In addition to growth, many investors look at emerging markets such as China as potential protection against a falling dollar. No one wants to lose money any more after the market crash of last year, but neither can anyone afford to miss out on potential huge growth ahead. Money is flying back to Chinese stocks, causing valuations to rise rapidly. Are there still windows of opportunity left?

As the dollar falls against the euro, yen and other major currencies, China and other emerging economic powers holding lots of dollars and U.S. securities are crying foul, and for an end to the dollar’s central status in global commerce.

If they are truly disgusted, they should look to themselves for answers.

We are living through one of the times in history when a major and irrevocable shift is taking place. It will be a time that will be the subject of controversy amongst historians and, no doubt, there will be arguments about causation, about what set off a chain reaction of change. They will perhaps ponder and wonder that so many people were so blind to what was actually taking place before their eyes.

The shift that we are witnessing is the move of economic power from the West to the East. It is a well worn theme on Cynicus Economicus, that we are seeing the rise of China, and the fall of the US, and the process is now accelerating. Alongside the fall of the US, we are also seeing further declines in countries like the UK.

click to enlarge

Source: ODCE, Ministry of Commerce, China Statistics Bureau, Tralac report (2007), World Trade Atlas (2008), MOFCOM

China is the second largest trade partner of the U.S. Total trade with China amounted to $194B with the U.S. running a trade deficit (imports greater than exports) of $123B as of July this year. In fact, the U.S. has been running a trade deficit with China for many years now. In recent years however, the deficit gap has widened. As trade with China grew exponentially over the years, the trade deficit zoomed from just $6M in 1985 to $268B in 2008.

The last U.S. merchandise trade with China amounted to $405B. This represented about 12.4% of U.S. merchandise trade with the world.