Portable Alpha

Is the PBoC Running Out of Capital?

PBOC <-> MOF would represent a dilemma and RMB revaluation is definitely a catch-22 for China, but may to a certain extent, the U.S. as well.

I remember reading one of Andy Kessler's books mentioning how China and other countries have been overproducing and hence in a sense subsidizing US consumers' overconsumption. What the former has gained were large quantities of Benjamins in green, tho the latter have gained real, actual, tangible and intangible commodities, goods and services, which are more realistic and definitely come in handy in many ways than an accounting unit per se.

Hence, if China eventually or actually gets into real deep "stance", the US wouldn't have a better situation either. I guess just one example, Wal-Mart's success for years and especially in the recent decade in part is correlated with China's overproduction and mass production at relatively lower cost, which helps WMT for years maintain its No.1 rank
amongst GF500 and F500 [interchangeably with XOM tho]. It helps many Americans realize "making US wages and purchasing at Chinese prices", just laying it out from an academic point of view, not judging nor anything.

Second point, because of the very undervalued/cheap RMB per se, it offers key incentive to global investors keep pumping big bucks in FDI for years. Imagine, giants like MSFT, IBM, GOOG, major commercial banks, investment banks, accountancy firms and other key international companies, have been able to recruit talents and semi-talents from top-tier universities and regular colleges at significant lower cost [albeit rising a bit], if not for the undervalued RMB and such. It enables expats purchasing a 20 million USD worth condo at Park Avenue at 6 to 10 million USD in Beijing [even mimicking the name, the one south of chaoyang park, i.e.], it makes daily grocery preposterously affordable for expats and still in the mean time stimulating local economy. Hence, its should be bi-directional, and both peoples and policy-makers across the pacific should work more together on key pertaining issues.

Michael, I guess when you get back, I should really pop in D22 when you will be around, that will be chill :-)