[Peace-discuss] Fw: [gangboxnews] Implications of China's Currency
Policy on Trade
E. Wayne Johnson
ewj at pigs.ag
Fri Nov 20 11:29:30 CST 2009
Most of the time that I was in China (1996-2001) the official exchange
rate was ¥8.27/$1
I could pretty consistently get 9 from the "black market" since people
wanted dollars, and got 10 on one occasion in Beijing. In Guangzhou,
dollars had to be changed to HK money first, then to RMB. The net
result was about 9 to 1.
Today the rate is 6.83/1
There is really no such thing as fairness in regard to currency
exchange, arbitrage and the carry trade. There are windows of
opportunity for making money simply flipping currencies in a cyclical
way until the music stops and there are no available chairs.
In 1999, software designer Bob Brill told me that his opinion was that
the exchange rate should be 4 to 1
(actual rate was 8.27 to 1)
For some items one can buy as much or more with 1 RMB in China as one
can buy in Urbana with $1, but items imported to China from the US will
be more expensive in China even after the exchange rate because of
tariffs and VAT. Since the USD and the RMB have been cross-pegged, the
RMB has experienced similar inflation to what occurred in the GWBush
years (about 10-12%, reported as 3% using Greenspan's "geometric
adjustment").
I would suppose that a "fair exchange rate" (scientifically determined
like Avogadro's number) would be about Y3.5 to $1 for typical values of
"3.5" and "1" under STP conditions.
On 11/20/2009 10:36 AM, Morton K. Brussel wrote:
> What is the "true" ratio $/RMB, and how is that to be fairly determined?
> What does an apple cost in China, and what does it cost in the USA? Or
> how about a basket of commodities produced locally?
> (I don't know much about economics.)
>
> --mkb
>
> On Nov 20, 2009, at 7:33 AM, E. Wayne Johnson wrote:
>
>> Americans should consider what is going on behind the scenes. Indeed
>> there are many Chinese-Foreign Joint Venture companies and even
>> Foreign-Owned Companies operating inside China. Part of the contract
>> of some of these companies with the PRC is that they are exporters.
>>
>> The current fascination with the undervalued reminbi (RMB) yuan is
>> nothing new at all. The yuan has been undervalued for many years.
>> Estimates of 40% are ridiculous. The RMB has been undervalued by a
>> factor of 2 or more for the 15+ years that I have been following it.
>>
>> Americans who think they want this corrected are barking up the wrong
>> tree. The RMB will decouple from the Dollar. But folks, that peg of
>> the RMB to the Dollar is one of the last threads that preventing
>> free-fall of the Dollar and skyrocketing inflation in the US.
>>
>> The Fundamental problem behind hollowed out American domestic
>> companies has nothing to do with China.
>>
>>
>>
>> On 11/20/2009 6:48 AM, unionyes wrote:
>>> ----- Original Message -----
>>> *From:* wilsoncharless <mailto:chasmn at hotmail.com>
>>> *To:* gangboxnews at yahoogroups.com <mailto:gangboxnews at yahoogroups.com>
>>> *Sent:* Thursday, November 19, 2009 10:23 PM
>>> *Subject:* [gangboxnews] Implications of China’s Currency Policy on
>>> Trade
>>>
>>>
>>> *Implications of China's Currency Policy on Trade*
>>> Three Reports from Congressional Research Service
>>> *Excerpts below*
>>> *from: *http://www.ncseonline.org/NLE/CRSreports/08Jun/RS21625.pdf
>>> <http://www.ncseonline.org/NLE/CRSreports/08Jun/RS21625.pdf>
>>> - - - If the yuan is undervalued vis-à-vis the dollar (estimates
>>> rage from 15% to 40% or higher), then Chinese exports to the United
>>> States are likely cheaper than they would be if the currency were
>>> freely traded, providing a boost to China's export industries (and,
>>> to some degree, an indirect subsidy).- - - *Such a policy, in
>>> effect, benefits Chinese exporting firms (many of which are owned by
>>> foreign multinational corporations)* at the expense of non-exporting
>>> Chinese firms, especially those that rely on imported goods.
>>> **
>>> *- - - Chinese statistics indicated that more than half of its
>>> exports to the world are produced by foreign-invested firms in*
>>> *China, many of which have shifted production to China in order to
>>> gain access to low-cost labor.*
>>> **
>>> *- - - These factors imply that much of the increase in U.S. imports
>>> (and hence, the rising trade deficit with China) is largely the
>>> result of China becoming a production platform for many foreign
>>> companies, rather than unfair Chinese trade policies.*
>>> **
>>> *5-8-08 Report in six page pdf at:*
>>> http://www.ncseonline.org/NLE/CRSreports/08Jun/RS21625.pdf
>>> <http://www.ncseonline.org/NLE/CRSreports/08Jun/RS21625.pdf>
>>> *1-9-08 Report in 57 page pdf at:*
>>> http://www.fas.org/sgp/crs/row/RL32165.pdf
>>> <http://www.fas.org/sgp/crs/row/RL32165.pdf>
>>> *6-17-09 Report in 12 page pdf at:*
>>> http://www.fas.org/sgp/crs/row/RS21625.pdf
>>> <http://www.fas.org/sgp/crs/row/RS21625.pdf>
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