Home > News of the moment > A sudden rise in the yuan would solve nothing

A sudden rise in the yuan would solve nothing

The main beneficiaries of a stronger yuan would not be American and European companies but the factories of Vietnam and Bangladesh.

By Malcolm Moore, in Shanghai 04 Jun 2011  Full Article Here:-

A stronger yuan would benefit China ? but its rise must be gentle

Much of China’s inflation has been caused by rising food prices, in which the country is practically self-sufficient.

Before we start, let me make a full disclosure. I live in China, but unfortunately I am paid in pounds, not yuan.

When I arrived, three years ago, the arrangement seemed generous. At nearly 15 yuan to the pound, sociable expats could be seen on Shanghai’s Bund drinking £5 martinis with abandon. But it turns out that, according to the dry martini index, the pound was overvalued. A 28pc dip against the yuan since then has helped Shanghai sober up.

These days I may drink less, but my apartment is smaller. I have a nervous tic of scanning the foreign exchange rates for signs of trouble. And I get a queasy feeling in my wallet when economists and politicians start calling for China to revalue its currency.

So let me try to debunk the various arguments underpinning the non-stop nagging for China to have a stronger currency.

In the United States, politicians have been jumping up and down and threatening a trade war for years.

Categories: News of the moment

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