China sets plan to let currency move higher

[Newsjock]

Source: The Globe and Mail

China signalled it will allow its currency to appreciate against the U.S. dollar, bowing to international pressure days ahead of a visit from U.S. President Barack Obama.

The move to allow the yuan to rise against the greenback would provide much-needed relief to countries trying to compete against China's mighty export machine and put further downward pressure on an already battered U.S. dollar.

China's latest quarterly monetary policy report said its foreign exchangepolicy will now consider “capital flows and changes in major currencies,” indicating China will carefully expose the yuan's value to fluctuations in global markets.

... But others see more sinister motives in the Chinese move. By resuming a yuan peg to a basket of international currencies, the biggest winner is likely to be the euro, not the dollar, said Peter Morici, former chief economist at the U.S. International Trade Commission. “That makes it more difficult for the Americans to complain, and the Europeans less likely to help lobby the Chinese,” he said.

Read more: http://www.theglobeandmail.com/report-on-business/china... /

[Mika]

1. China made stuff will go up a couple percent. I guess US factories will be built quickly.

[roamer65]

2. China will start to outsource to Africa.

They have been establishing a "footprint" in Africa lately, for raw materials and cheap labor I am sure.

What you think on it?

[David Zephyr]

3. I guess our "Made in China" Soylent Green at Wal-Mart will cost us more now.

I guess I'll just have to downgrade to Soylent Orange.

[pampango]

4. It's going to take a lot more than letting their currency appreciate a little to come near

to balancing trade with the US and EU. They may realize that with Obama's visit and the harder line that he has shown towards their trade surplus with the West, things will have to change. Maybe they are trying to get out in front of that change.

China may feel more comfortable doing this now than in the past. In the last year their exports have fallen dramatically, but their economy has kept on growing by selling what they produced to their own citizens, creating the beginning of a domestic consumer economy that can support growth without as much exporting. Since the West, led by Obama, may start to insist on a dramatically reduced Chinese trade surplus (plus depressed economies in the West reduce the demand for Chinese export anyway), they are going to have to rely on domestic consumption to keep their economy growing.

[David Zephyr]

5. Kick.

This is a very big story that will impact the standard of living here.