Sunday, March 07, 2010

"Free" Trade with China

The Chinese Yuan won't be appreciating anytime soon.

Appearing at the news conference with Zhou, Commerce Minister Chen Deming said exports might not recover to pre-crisis levels for two to three years due to "uncertain and unstable" global conditions.

"It could take two to three years to recover to the 2008 level," said Chen. "Proceeding from the high unemployment and low deposit rates in the epicenter of the financial tsunami, the world consumer market and real recovery of China's exports require time."

This is an amazing statement.

High unemployment in the West along with low deposit rates, means China will artificially keep the Yuan low to encourage growth of exports.

So, using Chinese logic, the US could say, because of high unemployment and Chinese high savings rate, the US will fix the exchange rate with the dollar at a higher rate to boost US exports. (or force all Chinese exporters to "match" their exports with corresponding imports, or whatever hare-brained protection scheme we could come up with)

You think China would be okay with that?

and, of course, its probably not the US that is the most harmed by this Yuan policy, but poor countries who could be exporting cheap products to the US who are bumped out by the lower priced Chinese goods. China should be moving up the economic responsibility ladder now if you ask me.


1 comment:

Sandy said...

good post, A - keep 'em coming:)