This is an easy one. The yuan has been cast as being manipulated lower than natural by the Chinese authorities, to give its exporters a significant advantage on world markets (they still make stuff and sell it to other people, unlike us, so this policy actually does work for them). They have made money hand over fist making stuff and selling it to us in the West, they have money coming out the wazzoo now (we just have debts coming out the wazzoo).
Lately, the canny Chinese have realised that they no longer have such massive exports generating income for them. In fact, their concern recently is that they now have too many dollars, euros, pounds, etc, in their forex reserves - they would like to get rid of them (and ideally get gold instead, if it will just go down cheap enough to make it an excellent long term buy again... which it is about to do in 2010 I strongly believe - but that is a whole other story...).
So, if you are an export-based economy, and you realise that fewer people are buying your stuff, and in fact this is set to get worse if you read the tealeaves, and at the same time you have people around the world screaming at you to let your currency go higher... what could be better than to do exactly what they ask of you, and let your currecy appreciate? Let it go up BIG I say! This will make everything in the world that they wish to buy cheaper. If you are forced to move from a make-and-export emphasis, to a buy-and-consume emphasis, hell yes please make our purchases cheaper O smart people elsewhere in the world.
Those Chinese, they're smart. Our financial elites are begging them to do what is in their best interests anyway at this juncture. Which is only right, given they hold all the cards at this game of global poker we're in.
The next story will be we have had to raise interest rates in order that they will continue to buy our worthless government debt. Can you say "may I wash your car please sir?" in Cantonese...
Monday, 15 February 2010
China to allow the yuan to strengthen
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