China considers ending dollar peg

[jtabeb]

http://www.telegraph.co.uk/finance/7...ollar-peg.html

China ready to end dollar peg

The head of China’s central bank has given the strongest signal yet that the country will move away from pegging its currency to the dollar, but he said any changes would be gradual.



By Garry White
Published: 5:31PM GMT 06 Mar 2010

Zhou Xiaochuan, governor of the People's Bank of China Photo: AP


At the annual session of the legislative National People’s Congress in Beijing, Zhou Xiaochuan, governor of the People’s Bank of China, said that the days of the “special yuan” policy were numbered. He described the dollar peg as a “temporary” response to the global financial crisis, but gave no timescale for any change in policy. The currency has been pegged at about 6.83 yuan per dollar since July 2008.

[GRG55]

Re: China considers ending dollar peg

http://www.telegraph.co.uk/finance/7...ollar-peg.html

China ready to end dollar peg

The head of China’s central bank has given the strongest signal yet that the country will move away from pegging its currency to the dollar, but he said any changes would be gradual.



By Garry White
Published: 5:31PM GMT 06 Mar 2010

Zhou Xiaochuan, governor of the People's Bank of China Photo: AP


At the annual session of the legislative National People’s Congress in Beijing, Zhou Xiaochuan, governor of the People’s Bank of China, said that the days of the “special yuan” policy were numbered. He described the dollar peg as a “temporary” response to the global financial crisis, but gave no timescale for any change in policy. The currency has been pegged at about 6.83 yuan per dollar since July 2008.

Now where have we heard this before??

China Hints at Yuan's Departure from Dollar Peg

Wednesday, Nov 11th, 2009

(Reuters) - China sent its clearest signal yet that it was ready to allow yuan appreciation after an 18-month hiatus, saying on Wednesday it would consider major currencies, not just the dollar, in guiding the exchange rate.

In its third-quarter monetary policy report, the People’s Bank of China departed from well-worn language on keeping the yuan “basically stable at a reasonable and balanced level.” It hinted instead at a shift from an effective dollar peg that has been in place since the middle of last year.

“Following the principles of initiative, controllability and gradualism, with reference to international capital flows and changes in major currencies, we will improve the yuan exchange-rate formation mechanism,” the central bank said in a 46-page monetary policy report...

Wonder how many more times this will be "announced". If they did it any more "gradually" they'd be going backwards...

Ranks up there with the IMF repeatedly announcing the sale of the same bullion...:p

The bullhorn vs the kazoo in action...;)

[skyson]

Re: China considers ending dollar peg

Now where have we heard this before??

China Hints at Yuan's Departure from Dollar Peg

Wednesday, Nov 11th, 2009

(Reuters) - China sent its clearest signal yet that it was ready to allow yuan appreciation after an 18-month hiatus, saying on Wednesday it would consider major currencies, not just the dollar, in guiding the exchange rate.

In its third-quarter monetary policy report, the People’s Bank of China departed from well-worn language on keeping the yuan “basically stable at a reasonable and balanced level.” It hinted instead at a shift from an effective dollar peg that has been in place since the middle of last year.

“Following the principles of initiative, controllability and gradualism, with reference to international capital flows and changes in major currencies, we will improve the yuan exchange-rate formation mechanism,” the central bank said in a 46-page monetary policy report...

Wonder how many more times this will be "announced". If they did it any more "gradually" they'd be going backwards...

Ranks up there with the IMF repeatedly announcing the sale of the same bullion...:p

The bullhorn vs the kazoo in action...;)

wow, your observation is certainly very sharp!

[touchring]

Re: China considers ending dollar peg

They may revise the peg, by 5% but the peg will never be removed for as long as the Communist party is in power.

[shiny!]

Re: China considers ending dollar peg

Can someone please explain the significance of this? I see the Yuan-Dollar peg mentioned alot, but don't really understand what it does or what the ramifications would be if the Chinese de-pegged.

Thanks.

[FrankL]

Re: China considers ending dollar peg

Can someone please explain the significance of this? I see the Yuan-Dollar peg mentioned alot, but don't really understand what it does or what the ramifications would be if the Chinese de-pegged.

Thanks.

I second that. Can it somehow help to counter inflation in China that people like Xie and many others claim to foresee?

I can see it'll make Chinese labour relatively more expensive, giving China less of an edge. But is that the only direct effect?

[GRG55]

Re: China considers ending dollar peg

Can someone please explain the significance of this? I see the Yuan-Dollar peg mentioned alot, but don't really understand what it does or what the ramifications would be if the Chinese de-pegged.

Thanks.

The significance is that the Chinese are simply trying to deflect US and European criticism of their currency management.

The last time they made this exact same announcement [my post above] was just days before President Obama arrived in Beijing.

They may revise the peg, by 5% but the peg will never be removed for as long as the Communist party is in power.

I'm not certain what the reason is for the timing of this latest [re]announcement, but if it's not yet apparent, it soon will be. However I believe 'touchring' is correct...anybody suggesting this will lead to a significant voluntary adjustment in the Yuan-Dollar or Yuan-Euro exchange rate is deluding themselves. And anybody who thinks this means the Chinese are "abandoning" support for the US Dollar is beyond salvation...

[BuckarooBanzai]

Re: China considers ending dollar peg

Can someone please explain the significance of this? I see the Yuan-Dollar peg mentioned alot, but don't really understand what it does or what the ramifications would be if the Chinese de-pegged.

Thanks.

As long as China maintains their peg to the dollar, they will maintain an absolute wage advantage over the US economy, thus maintaining a positive flow of manufacturing jobs and capital investment dollars from the US into China. They will not abandon this until the US consumer can no longer purchase what Chinese make, or until there are no more jobs to be siphoned out of the US.

This is economic warfare, plain and simple. It is the Chinese elites and US elites vs the US people, and guess who is winning.

The US economy must be crushed in order to establish the New World Order. That is the number one agenda item for these people.

Until these global elites are convinced that the US economy is permanently crippled, expect to see more of this kabuki theater and jawboning on both sides of the pacific.

[GRG55]

Re: China considers ending dollar peg

The significance is that the Chinese are simply trying to deflect US and European criticism of their currency management.

The last time they made this exact same announcement [my post above] was just days before President Obama arrived in Beijing.



I'm not certain what the reason is for the timing of this latest [re]announcement, but if it's not yet apparent, it soon will be. However I believe 'touchring' is correct...anybody suggesting this will lead to a significant voluntary adjustment in the Yuan-Dollar or Yuan-Euro exchange rate is deluding themselves. And anybody who thinks this means the Chinese are "abandoning" support for the US Dollar is beyond salvation...

Here's a couple more views...

Roubini Says ‘Super Cautious’ China to Limit Yuan Gain to 4%

March 8 (Bloomberg) -- China will limit the yuan’s appreciation to 4 percent over the next 12 months because of a “super cautious” outlook on the global economy, said New York University Professor Nouriel Roubini.

The central bank may end a 20-month peg to the dollar as soon as the second quarter, allowing a 2 percent one- step gain, and then let the currency strengthen another 1 percent to 2 percent in 12 months, Roubini said in an interview in New York...

China’s Shrinking Trade Surplus May Ease Pressure for Yuan Gain

March 8 (Bloomberg) -- Top Chinese officials said the nation’s trade surplus is shrinking and urged caution in exiting crisis policies, suggesting that the yuan may not appreciate soon against the dollar...

[touchring]

Re: China considers ending dollar peg

This is economic warfare, plain and simple. It is the Chinese elites and US elites vs the US people, and guess who is winning.

I beg to differ. It's the US elites against the US people. The Chinese elites are only the collaborators.

[GRG55]

Re: China considers ending dollar peg

...I'm not certain what the reason is for the timing of this latest [re]announcement, but if it's not yet apparent, it soon will be...

Could be wrapped up in all of this...

China foreign minister says U.S. ties "disrupted"

BEIJING
Sat Mar 6, 2010 11:22pm EST

(Reuters) - Chinese Foreign Minister Yang Jiechi said on Sunday that relations with the United States had been "seriously disrupted," after a rise in friction between the two big powers...

...The United States "must respect China's core interests" on Taiwan and Tibet, Yang added. "I believe the United States understands very well China's core interests and major concerns.

"China has always attached importance to its relationship with the United States," he said. "Resolutely adhering to one's principled stance is not the same thing as being hardline."

But the two big trade partners appear to want to lower the temperature of the disputes as they also grapple with how to deal with how to deal with Iran and North Korea.

Beijing has not yet acted on its threat to sanction U.S. companies involved in the arms sales to Taiwan, the self-ruled island that Beijing claims as part of its territory.

Last weekend, Chinese Premier Wen Jiabao said he wanted trade friction with the United States to ease.

[ThePythonicCow]

Re: China considers ending dollar peg

I beg to differ. It's the US elites against the US people.

I'd like to differ with both.

I'd describe it as the Western "Civilization" elites against the world's people. Whether the Chinese and Russians will submit or resist is unclear.

[Chris Coles]

Re: China considers ending dollar peg

What concerns me is a what if?

What if the Chinese closed their borders to exports to the rest of us and smiled an inscrutable smile? IMHO we would be stuffed! Most of our electronics now come from China. Go look in any hardware store in the US and find made in the USA labels..... no?

There is historical precedent, but I wonder if any of you know that.

[jtabeb]

Re: China considers ending dollar peg

What concerns me is a what if?

What if the Chinese closed their borders to exports to the rest of us and smiled an inscrutable smile? IMHO we would be stuffed! Most of our electronics now come from China. Go look in any hardware store in the US and find made in the USA labels..... no?

There is historical precedent, but I wonder if any of you know that.

Get your shortwave while you can.

I thought exactly what you are thinking. And that's why this year I updated all my tech.

Best computer I could afford (way overspec'd), Software Defined Shortwave radio receiver, etc. (got to stay informed when the internet is down, and let's face it, mainstream media ain't gonna cut it).

Bottom line even stuff that's "Made in the USA" is critically dependent on parts from China, esp small ICs and the rest.

I'm pretty sure that while my ENTIRE computer was sourced from US suppliers and Manufacturers, probably not a single component or part was ACTUALLY manufactured in the US.

[jpatter666]

Re: China considers ending dollar peg

What concerns me is a what if?

What if the Chinese closed their borders to exports to the rest of us and smiled an inscrutable smile? IMHO we would be stuffed! Most of our electronics now come from China. Go look in any hardware store in the US and find made in the USA labels..... no?

There is historical precedent, but I wonder if any of you know that.

It's called "cutting off your nose to spite your face".

OK, would things get tight for a bit? Sure. Maybe six months of pure ugliness. But China is *not* the world. There are other plants in other countries and a crash program could get lots of stuff going fast. With the potential profits to be made I think you'd be surprised.

And China would forfeit decades of manufacturing goodwill. No company would trust sourcing products from China for years.

And don't ever forget. The #1 goal of the Communist Party is staying in power. Killing the manufacturing base and throwing lots of workers out in the street is not the way to guarantee that!

Bottom line: I give this < 0.01% probability. Might be wrong, but not losing sleep over that. Much higher probability events to lose sleep over.... ;)