| How far will RMB go? | |
|---|---|
| Jan 31, 2008 00:34 |   |
 | On Wednesday, US Fed cut the interest rates again, decreasing by 50 points. Stimulated by US Fed's move, the exchange rate between RMB and dollar is 7.1853 : 1. After the Fed announces to decrease the interest rates, the S&P Index once increased by 1.7 percent but went down quickly. To cut interest rates about 125 points just in eight days shows that US' determination to avoid recession. However, dollar is depreciating greatly. On contrary, other currencies including RMB and Euro has been appreciating quickly. After US Fed declares to cut the interest rates last week, some economists warn that China will burden much pressure from it. More money will flow to China and this makes inflation rates increase. IMF also warned US that continous interest rates cuts can not drag US out of recession. How do you view this issue? With the dollar depreciating, Chinese RMB is appreciating very quickly. As some economists say, quick appreciation is not goo for Chinese economy. Do you think so? How far will RMB go? |
| Jan 31, 2008 00:41 | #1 |
| Since RMB has appreciating very quickly, some people say that RMB will replace dollar and become the strongest currency in the world. Will this become true? |
| Jan 31, 2008 08:37 | #2 |
| The RMB will either be the strongest or close to it. The ratio of RMB/US$ several years ago was appx. 8-10/1(?) and now it's 7/1. If it continues at this pace then in several more years the ratio will be 5/1. I'm sure there are a lot of economic factors that may intervene which may slow or speed up this ratio.The appreciation of the RMB means that consumer prices for the Chinese will increase. If wages and employment increases also, then no problem for those people fortunate enough to have the better paying jobs. As in any society, there will always be a portion of the population that will not be able to benefit from the appreciation of their currency. |
| Jan 31, 2008 09:05 | #3 |
| it seems that china has less desires for forigen funds then before. 200 billion sovereign fund and huge forex reserves requires CN seek investment mkt abroad. it is said CN has significant influence on austrilian mining industry, heard its seeking acquisition of Alberta chemistry (maybe minging) corp prematured..I don't want to say more, in all CN needs money in hand to generate more money (cn is dedicated in african mkt, arouse criticism from other developed nations saying this is 2nd colonialism. I would like to recommend an article belwo : British Prime Minister Says China Should Look to London for Sovereign Fund Investments Jane Wardell January 18, 2008 - 11:16 a.m. BEIJING (AP) - British Prime Minister Gordon Brown began a major effort Friday to position Britain as China's premier international business partner, offering London as a base for distribution of the Asian nation's state fund for private investment. Visiting Beijing with a high-profile delegation of business leaders, Brown also opened a local office of the London Stock Exchange and discussed cooperation on education, alternative power, climate change and sustainable cities with Chinese Premier Wen Jiabao. Brown's two-day visit, which also takes in Shanghai, is calculated to gain an advantage on the United States and the rest of Europe to the investment opportunities and economic benefits offered by both China's increasingly open domestic consumer market and growing money pot for overseas investment. The story continues below... This article Email this page | Print this page | Tell us your thoughts Helpful links Site Search Canadian Business Online Become a member now | My Canadian Business Join our advisory panel Brown said that China's $200 billion sovereign wealth fund could offer significant investments for British businesses, adding that he did not share the concerns of other countries about the state funds. "Where others may wish to see a risk, I see the rise of China and the reality of globalization not as a threat but as an opportunity," Brown told a summit of Chinese and British business leaders after he was greeted by Wen at the Great Hall of the People in central Beijing. |
| Jan 31, 2008 09:06 | #4 |
| The United States has been particularly skittish about accepting investments from sovereign wealth funds and state-funded companies, fearing interference from foreign governments in private companies. U.S. lawmakers successfully killed off part of a deal between DP World and British port operator Peninsular and Oriental Steam Navigation Co., or P&O, last year — a furor in Congress led the United Arab Emirates company to sell the division that manages U.S. ports. Chinese officials have tried to diffuse concerns about political interference by saying they plan to make minority investments abroad, leaving control in the hands of foreign managers, and avoid politically sensitive industries such as energy and telecommunications. Wen said that China had earmarked around $60 billion to $70 billion of the fund for foreign investment. "This is a very substantial fund. It can invest positively. I realize that in some countries it is controversial, but I have talked to Premier Wen (about that)," Brown said. Wen said the fund, set up to invest some of China's $1.5 trillion in foreign exchange reserves, would help redress the imbalance caused by China's hefty foreign trade surplus. "We have to ensure our foreign reserves are invested appropriately and fairly," he said, adding that the fund would be run completely independently of the government. "This investment facility is entirely commercial." |
| Jan 31, 2008 12:30 | #5 |
| 3.50 Yuan x 1 US Dollar is a realistic bottom Very damaging to the poor, but real. Chinas Government is not ready for it. |
| Jan 31, 2008 19:38 | #6 |
| "Chinas Government is not ready for it." Exactly, JCL. China is very careful on the issue of RMB appreciation. Quick RMB appreciation is bad for China. As GARYKINKADE analysed, the appreciation of the RMB will make consumer prices for the Chinese increase. If wages and employment could keep pace with RMB appreciation, there would be no problem. But the reality is that wages don't increase very much though the CPI is very high. On the other hand, dollar has been depreciating very much after the US Fed cut the interest rates again and again. This pushes RMB to appreciate faster. I wonder if US intentionally cut the interest rates to make dollar weaker and weaker so that RMB will appreciate very quickly. It is what US expects. Why does China refuse many foreign investors to enter Chinese domestic market? China doesn't want too much money to flow to its domestic market. Inflation is starting to appear. That more and more money have flowed to China will worsen the situation. Why did Brown position Britain as China's premier international business partner and welcome Chinese investors to invest in London? At present, the world economies are depressing. However, Chinese economy is still developing. Brown just wants to develop British economy with the help of China. |
| Jan 31, 2008 22:25 | #7 |
| Jimmyboy, i bet mr. KINKADE is multi-dimentional watcher from up to space and down to business. i want to point out is wages are indexed with inflation rate, if inflation is above upper level band, in another words, more and more paper money in circulation cannot reflect real GDP (money losing purchasing power - depreciation), the result is psychological uncertainty of mkt real demand, hesitance of business further investment - recession... |
| Feb 1, 2008 19:57 | #8 |
| Quote:"i want to point out is wages are indexed with inflation rate, if inflation is above upper level band, in another words, more and more paper money in circulation cannot reflect real GDP (money losing purchasing power - depreciation), the result is psychological uncertainty of mkt real demand, hesitance of business further investment - recession..." Yes, Marrie. That is why some people say RMB is appreciating in international market but depreciating in domestic market. "wages are indexed with inflation rate". Do you mean that wages increase with inflation rate soaring? But the situation in China is that wages can't keep pace with inflation rate. Therefore, many people suggest that wages should be increased now. BTW, if more paper money in circulation cannot reflect real GDP, what can reflect GDP, Marrie? |
| Feb 2, 2008 09:22 | #9 |
| Jimmy, if 3 persons( salary 1000/per person) do one person-loaded job (product/service), the mkt price of this product/service is much higher than if 1.5 persons do one person-loaded job coz the first scenario results $1500 more paper money in circulation than the second scenario. However the real wealth still remains the worth of one job. That’s why we call it inflation in macro way. From corp run perspective, business is losing money (less productivity) and needs to lay off labor. Optimal inflation is 2-3 % that could keeps labors from being too exhausted. Speaking of Forex, PRChina, I think, should still need gov involvement in playing global Forex game to keep ex rate in reasonable level that protects china’s export. U$1: RMB 3.5 is a disaster. China is able to make its currency strong as long as it is willing to use modern infrastructure at the expense of millions of millions of labors losing jobs – social chaos and turmoil. |
| Feb 2, 2008 19:35 | #10 |
| Thanks for explaining, Marrie. You are really an economist. "U$1: RMB 3.5 is a disaster. China is able to make its currency strong as long as it is willing to use modern infrastructure at the expense of millions of millions of labors losing jobs – social chaos and turmoil." 1 : 3.5? Will US dollar depreciate so much? If it were true, US economy would collapse. I don't think US and China will let this happen. In 1997, China started its reform in state-owned enterprises. The government wanted to improve state-owned corporations' competence by reducing the staff and reorgnizing assets. But the reality was that many people had lost their jobs and those bosses had gain much profits from reorgnization. Finally, many enterprised went bankrupt. So far, many people still stay at home and dont' got jobs yet. If millions of millions of labors lose their jobs, social chaos and turmoil will break out. The government won't let this happen. |
Page 1 of 3 < Previous Next > Page:
Post a Reply to: How far will RMB go?
Copyright © 1998-2024 All rights reserved.