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william wallace · Joined: 14 May 2003 Posts: 2869 Location: in between

Nothing to say.

cujobytes · Posted: Thu May 19, 2005 5:31 am Post subject: >

What makes you think they'll float the RMB? because the U.S. wants them to?
When this subject is bought up in the media it's always by Washington. Beijing only ever comments on it to say they won't be bullied by Washington.

Roger · Joined: 19 Jan 2003 Posts: 9138

Well, yes, the noises emanating from the power circles are indicative of imminent adjustments. BUt they have also been heard to be thinking aloud about how to stem the inflow of foreign funds to be parked on CHinese banks for the speculative business of multiplying here throough the miraculous offices of replacing the current peg with another one.
The last thing the Chinese will allow to happen is for Mr Soros and his brethren to siphon off more U.S. dollars from China than they pumped into it in the first place.

The new exchange rate will hardly differ from the current one. If you get 10% more foreign currency units then you will be lucky! Nowhere near a halving of the current exchange rate.
Last time I witnessed a virtual halving of the exchange rate was in 1995, when the RMB ceased to trade for around 4.5 RMB to the U.S. dollar to the present exchange rate. They operated a devaluation.
What changed then was that Chinese salaries had to be adjusted; instead of RMB 1300 I got RMB 2500. This time around, I doubt your salary's purchasing power will increase as dramatically. Maybe the percentage of convertible income will be dropped a notch or two?

Volodiya · Posted: Thu May 19, 2005 6:15 am Post subject:

China seems to be worried about maintaining stability of the economy and banking system (admittedly not on a good footing, with 200 billion USD equivalent in non-performing loan) before satisfying the U.S. and E.U. demands that they adjust the peg to allow the RMB to become more valuable.

But all the signs are that they are working on doing that, sometime in the near future, and trying to lay acceptable groundwork for the change. If they can manage it, the change will be small, on the order of 2-3%; and, in a positive direction for those of us on RMB income.

william wallace · Joined: 14 May 2003 Posts: 2869 Location: in between

Nothing to say.

jezebel · Joined: 18 May 2005 Posts: 53

because.. who wants to be tied to a sinking currency?

jezebel · Joined: 18 May 2005 Posts: 53

but don't expect it too soon.. a cheap dollar is china's competitive advantage. why else would you build the factory there if exports are suddenly more expensive? just look at the impact that a 30% increase in the Canadian dollar (or should I say, a 25% drop in the greenback?) had on Canadian industry.. if I were the Chinese government, i'm not sure i'd be keen on doing anything that has such a negative impact on foreign in vestment.

andrew_gz · Joined: 15 Feb 2005 Posts: 502 Location: Reborn in the PRC

"if I were the Chinese government, i'm not sure i'd be keen on doing anything that has such a negative impact on foreign in vestment."

Absolutely.
If I were the Chinese government, I would go about findings way to float it and see it drop.

Two birds with one stone.
Shut up the naysayers and enhance your competitive edge.

If you thought the "China price" was hard to beat before?