Duude

America to China: Stop Buying Our Dollars! And Another Thing: Please Buy Our Dollars!

While allowing the Yuan to appreciate would result in a higher standard of living within China for some, its really short term thinking as the Chinese understand it. Due to its population and still existent government-run corporations dotting the landscape of the Chinese economy, we aren't going to see any sudden and substantial changes to the Yuan for years to come. China still has a great number of rural dwellers who haven't yet moved into the working class due to lack of work. That keeps them from becoming part of the consumer class. The Government-run corporations are socialist holdovers that still provide employment for a great number of Chinese workers. These are inefficiently run companies that the government would love to close but can't till enough private employment is available for all. The wage disparity in China is absolutely huge. The Chinese know they need to remain a low cost manufacturer to the world for years longer before they can pragmatically allow the Yuan to appreciate naturally. In the meantime, they will allow some appreciation now and then but only to reduce foreign criticism. I do expect the Chinese as well as other Foreign governments will lower their treasury bidding so as to get better interest on their investment but it will be a balancing act as fewer buys will lead to the Yuan appreciating which they don't want.


On Mar 10 09:10 AM MarkitFreeek wrote:

> Full disclosure: Long TBT
>
> The Chinese can improve the lot of their people by letting the yuan
> appreciate at some point. Many people don't realize that the human
> rights issues will improve when this happens. The government there
> is right to act slowly, though. Instability in a country of a billion
> people needs to be managed.
>
> I think that, eventually, when the treasury bubble bursts, the Chinese
> will purchase less treasuries in favor of commodities, and that's
> when we'll see a ginormous transfer of wealth from West to East.