Chinese Premier: Yuan Rise Would Mean Bankruptcies

[touchring]

What Wen meant is that the factories are no longer in the US, if there are no factories, how can jobs be created? lol

http://www.cnbc.com/id/39317675

An appreciation of 20 percent in China's currency would cause widespread bankruptcies in China's export sector, where firms operate on thin margins, Chinese Premier Wen Jiabao said on Wednesday.

"The conditions for a major appreciation of the renminbi do not exist," Wen said in a speech to U.S. businessmen in New York. He said the appeciation of China's currency demanded by U.S. lawmakers would not bring jobs back to the United States because U.S. firms no longer make such labor-intensive products.

A House of Representatives committee scheduled a vote for Friday on a China currency bill, and a Democratic aide said the full House was expected to vote on the measure next week.

Critics inside and outside Congress say China deliberately undervalues its currency by as much as 25 percent to 40 percent to give Chinese companies an unfair trade advantage, hurting U.S. exports and job prospects.

"The conditions for a major appreciation of the renminbi do not exist,"
Premier Wen Jiabao said.

Obama said on Monday that China had not done enough to raise the value of the yuan, keeping up Washington's tough rhetoric on Chinese policy as U.S. lawmakers planned legislation to punish Beijing.

"It is time for Congress to pass legislation that will give the administration leverage in its bilateral and multilateral negotiations with the Chinese government," House Speaker Nancy Pelosi said in a statement.

"If China allowed its currency to respond to market forces, it could create a million U.S. manufacturing jobs and cut our trade deficit with China by $100 billion a year, with no cost to the U.S. Treasury."

[GRG55]

Re: Chinese Premier: Yuan Rise Would Mean Bankruptcies

What Wen meant is that the factories are no longer in the US, if there are no factories, how can jobs be created? lol

"The conditions for a major appreciation of the renminbi do not exist," Wen said in a speech to U.S. businessmen in New York."

...

What Wen Jaibao really wanted to say to them was..."The Yuan is our currency, but your problem..."

[for those of you too young to remember, Google "John Connally" :-) ]

[Starving Steve]

Re: Chinese Premier: Yuan Rise Would Mean Bankruptcies

Let me understand this stupid protectionist-thinking: China should re-value it Yuan upward so that the U.S. dollar is de-valued relatively downward? And why this relative de-valuation of the dollar against the Yuan? Is this proposal to de-value the dollar by re-valuing the Yuan to subsidize failing U.S. businesses like green energy businesses that don't produce energy but look great on paper?

Shall I begin my rant about solar energy panels that produce next-to-nothing in electricity? Shall I begin my rant about windmills that don't turn in California? ---Tidal power plants that don't produce? --- Ethanol-gasoline blends that burn through your car's gas tank so fast that you need to re-fill your gas tank twice or even thrice a week, just to drive in-town, in a town like Regina, Saskatchewan?

Failing businesses and stupid ideas in North America, and we need to subsidize these with a relative de-valuation of the U.S. dollar? This is Princeton University's economics?

I won't rant further, but great to see that the Obama economics team in Washington is resigning. Who might step-down next? How much longer for Bernanke to head the Fed? How much more fuzzy-thinking, de-valuation, zero-interest rates, and inflation do we have to take?

[touchring]

Re: Chinese Premier: Yuan Rise Would Mean Bankruptcies

The US is not competitive and has a failing economy. Currency devaluation won't help the US. When the same situation occurred in the mid-1800s between China and the UK, anyone knows how it ended up? History replaying?

[Munger]

Re: Chinese Premier: Yuan Rise Would Mean Bankruptcies

Let me understand this stupid protectionist-thinking: China should re-value it Yuan upward so that the U.S. dollar is de-valued relatively downward? And why this relative de-valuation of the dollar against the Yuan?

Perhaps I can help you understand what is going on here:

China is manipulating its currency, keeping the Yuan artificially low against the dollar (and, as a consequence, the rest of the world). This makes Chinese imports artificially cheap for everyone. This hurts American manufacturers when selling their goods in America, abroad or to the Chinese. This leads to trade imbalances.

If China would let the market price its currency, it would rise naturally and the Chinese consumer would have more money to spend on domestic and foreign goods. America has little options left but to be protectionist, as China has repeatedly shown that it will not allow the Yuan to rise.

I find the Chinese' comments disingenuous: yes, they have taken a lot of America's manufacturing capacity over the years, but that is precisely what currency manipulation will do. If they continue, then there is all the more incentive to build the future factories in China as well, instead of in America, where the labor will have become much more competitively priced.

[GRG55]

Re: Chinese Premier: Yuan Rise Would Mean Bankruptcies

Perhaps I can help you understand what is going on here:

China is manipulating its currency, keeping the Yuan artificially low against the dollar (and, as a consequence, the rest of the world)...

And pray tell exactly how anyone, including yourself, is able to judge exactly what constitutes an "artificially low" exchange rate between any two currencies, given the currency markets are the most manipulated markets - by governments - in the world? Manipulation by the USA, and "the rest of the world", is chronic and rampant.

[Munger]

Re: Chinese Premier: Yuan Rise Would Mean Bankruptcies

And pray tell exactly how anyone, including yourself, is able to judge exactly what constitutes an "artificially low" exchange rate between any two currencies, given the currency markets are the most manipulated markets - by governments - in the world? Manipulation by the USA, and "the rest of the world", is chronic and rampant.

Well, I obvious cannot verify the accuracy of such numbers, but supposedly the Chinese are a massive net purchaser of U.S. treasuries. I have little reason to doubt this. And that's pretty much all one needs to look at. If China terminated this practice, the market would determine the exchange rate. If that were to happen, the Yuan would dramatically rise against the dollar, making U.S. goods more competitive. So, the strength of the Yuan against the dollar is artificial to the extent its value relies upon mass net purchases of treasuries by the Chinese.

[GRG55]

Re: Chinese Premier: Yuan Rise Would Mean Bankruptcies

Well, I obvious cannot verify the accuracy of such numbers, but supposedly the Chinese are a massive net purchaser of U.S. treasuries. I have little reason to doubt this. And that's pretty much all one needs to look at. If China terminated this practice, the market would determine the exchange rate. If that were to happen, the Yuan would dramatically rise against the dollar, making U.S. goods more competitive. So, the strength of the Yuan against the dollar is artificial to the extent its value relies upon mass net purchases of treasuries by the Chinese.

I understand the US Federal Reserve Bank is also a rather large ner purchaser of US Treasuries. Using your criteria, does that not also make them a currency manipulator too?

[Penguin]

Re: Chinese Premier: Yuan Rise Would Mean Bankruptcies

All you need to know is that China refuses to let their currency float. In the end their refusal to allow the yuan to float is proof positive that they are well aware of the benefits that they garner from such an arrangement.

This is where the rubber meets the road gents.

All the rants and talks and discussions and probing analysis of this economic crisis were all well and good, but this is where we find out who wants to apply the medicine and who wants another shot of stimulus morphine. This one cuts deep. This one means an acknowledgment that American standards of living are based on an unhealthy arrangement of manipulated trade and capital flows. Currency manipulation by China is an act of war, not on American banks or consumers, but on our builders and manufacturers. IOW all those little people who actually take raw materials and add value to it allowing the production of capital. It is import tariffs and export subsidies in one package.

We have all spoke eloquently of changing the face of trade, of ending unhealthy and unsustainable global imbalances. This is not the end all and be all of that change but it is a necessary first step. Next up we need to take on Europe's VAT and reconcile it with our trade laws. As it stands it is yet another subsidy for THEIR exports and an tariff on OUR imports. Of course their manufacturers are going to get roughed up. Of course our consumers are going to get roughed up. But that is all part of rectifying the problem.

That's the trouble with all of these pompous intellectuals who espouse free trade, as it is practiced it means the American manufacturers get slaughtered while our FIRE base reaps the benefits of global imbalances. Have we so soon forgotten Eric's recycled dollar talks of a couple years ago? This is where those money flows start gents. The time for talk is over. It is time for China to start taking their lumps just like the rest of us.

Will

[GRG55]

Re: Chinese Premier: Yuan Rise Would Mean Bankruptcies

All you need to know is that China refuses to let their currency float. In the end their refusal to allow the yuan to float is proof positive that they are well aware of the benefits that they garner from such an arrangement.

This is where the rubber meets the road gents.

All the rants and talks and discussions and probing analysis of this economic crisis were all well and good, but this is where we find out who wants to apply the medicine and who wants another shot of stimulus morphine. This one cuts deep. This one means an acknowledgment that American standards of living are based on an unhealthy arrangement of manipulated trade and capital flows. Currency manipulation by China is an act of war, not on American banks or consumers, but on our builders and manufacturers. IOW all those little people who actually take raw materials and add value to it allowing the production of capital. It is import tariffs and export subsidies in one package.

We have all spoke eloquently of changing the face of trade, of ending unhealthy and unsustainable global imbalances. This is not the end all and be all of that change but it is a necessary first step. Next up we need to take on Europe's VAT and reconcile it with our trade laws. As it stands it is yet another subsidy for THEIR exports and an tariff on OUR imports. Of course their manufacturers are going to get roughed up. Of course our consumers are going to get roughed up. But that is all part of rectifying the problem.

That's the trouble with all of these pompous intellectuals who espouse free trade, as it is practiced it means the American manufacturers get slaughtered while our FIRE base reaps the benefits of global imbalances. Have we so soon forgotten Eric's recycled dollar talks of a couple years ago? This is where those money flows start gents. The time for talk is over. It is time for China to start taking their lumps just like the rest of us.

Will

1. If you think raising the Yuan exchange rate vs the US Dollar is going to solve these imbalances you're far oversimplfying the circumstances...just like the intellectual heavyweights that populate the US Congress;
2. If you think that the USA is lily white and isn't equally adept and inclined to manipulate its currency and asymmetrically applying other trade sanctions, you haven't had the experience of being a small economy trading with the USA.

The global trade and current account imbalances are a serious problem - on that we agree. That it's going to be fixed by those dastardly foreigners unilaterally changing their ways to accomodate the holier than thou positions imposed by the United States is to believe in fairy tales...

[Penguin]

Re: Chinese Premier: Yuan Rise Would Mean Bankruptcies

I never said that floating the yuan was going to solve this problem. Matter of fact I specifically stated that it would not in and of itself do so. What I did state was that it was a necessary first step. There is a reason why currency manipulation is considered an economic act of war. It is an intentional imposition of trade tariffs. It is tilting one party of the trade tilting the field in favor of his exporters and your importers.

Haven't we had just about enough of that in the last few decades?

This won't stop the FIRE economy, this won't fix the already blown and exploded bubbles, and it won't magically heal the cancerous trade relationship between China and the US. But failure to take this issue on honestly and admit that it favors the monied Wall Street interests at the direct expense of American manufacturers is to admit that we really do not want to cure global imbalances. If you don't let the natural feedback loops such as this one act to transfer purchasing power and wage competitiveness then the unhealthy capital flows and the artificial noncompetitiveness of American industry will not be stopped.

This is a necessary but not sufficient step to rebalance global trade.

Will

[chr5648]

Re: Chinese Premier: Yuan Rise Would Mean Bankruptcies

Once again this problem was caused a long time ago when china received the most favored nation status, allowing a third world country was to essentially under price a first world country. At this point there is not much to be done.

[touchring]

Re: Chinese Premier: Yuan Rise Would Mean Bankruptcies

China's final goal is not economic development, but reunification of the motherland, economic policy is just part of an overall military strategy.

In time to come, China will want to claim military dominance over the Asia Pacific, including South East Asia, Japan and Korea. China is hoping that a significantly economically weakened USA will voluntarily leave the scene. But if the US doesn't yield, that will mean war.

[jpatter666]

Re: Chinese Premier: Yuan Rise Would Mean Bankruptcies

China's final goal is not economic development, but reunification of the motherland, economic policy is just part of an overall military strategy.

In time to come, China will want to claim military dominance over the Asia Pacific, including South East Asia, Japan and Korea. China is hoping that a significantly economically weakened USA will voluntarily leave the scene. But if the US doesn't yield, that will mean war.

What about Russia? As I recall, much of Russian Siberia used to be Chinese.....

[Thailandnotes]

Re: Chinese Premier: Yuan Rise Would Mean Bankruptcies

You're kidding right?
China's final goal....is to control the solar system and they are evil?

China's final goal is not economic development, but reunification of the motherland, economic policy is just part of an overall military strategy.

In time to come, China will want to claim military dominance over the Asia Pacific, including South East Asia, Japan and Korea. China is hoping that a significantly economically weakened USA will voluntarily leave the scene. But if the US doesn't yield, that will mean war.