if china floats the yuan

[TGM]

Quote from mercure160:

Interesting idea in itself, do you have any link or source validating this approach? intuitively, war are decided by leaders not people?

I would have thought that men will have to work harder to get social status in order to get a wife. This should lead to a very capitalist society where social status and money takes importance. Now there is no doubt that china is promoting the rise of nation awareness. For century, it was not the case and japan who took the nation idea from the west, saw clearly the advantage during the meije area.

We should be carefully with demography. In the heart of china people are very traditional (they would make 10 babies per couple without the law) and a partial lifting of the one child policy ratio if the first child is a girl could lead to a quick surge of millions of new girls ...

I agree with you. We should be careful with demographics. We have to remember that the Chinese are dominant in many parts of Asia (Singapore etc). We might see a Thai girl and not realize that she is really Chinese.

You are right to point out that this imbalance could drive the Chinese men toward financial success so that they can get a wife. This is already happening from what I hear. Jim Rogers wrote about the most successful Chinese men in Siberia taking Russian wives once they had "made it".

I do not have any links for you in regards to Male/Female imbalances and War. I don't have the time to pull them up right this minute. It really depends on the society as a whole. But young men either got to work or war historically. If you have social unrest etc. the authorities may think it wise to create an enemy (there is always an enemy around!) and go to war ----better to do that than risk a revolution and then end up with the leaders getting their heads chopped off!

Just look at China right this minute. They are protesting textbooks in Japan (imagine a protest of textbooks in another country ---absurd---any time you see something this absurd---there is probably something else going on). Pent up frustration.

The Chinese government sees it better to allow people the right protest Japan ---than to overthrow the Chinese Government. The Chinese Govt has a LONG memory and is fearful of another Tiananmen Square calling for the a change within China! Much better to allow the people to protest another country.

They have used history to create an enemy. But Why? A large population is difficult to control. Especially if the men are NOT getting women because there is a shortage. How this is going to effect the future is anyones guess. How many men are protesting the Japanese because they are NOT getting laid? I cant tell you.

 

[illiquid]

Is there no access whatsoever? How do American companies selling products in China repatriate their revenue in yuan? Pardon my ignorance.

 

[Chagi]

Quote from illiquid:

Is there no access whatsoever? How do American companies selling products in China repatriate their revenue in yuan? Pardon my ignorance.

The lack of futures options and forward contracts for USD to Yuan conversion is separate from the ability to do conversions between the two currencies. There won't be futures and forwards available until such time as China chooses to float their currency, since these hedging instruments exist for the purpose of lowering exchange rate exposure.

In the case of a pegged currency, there isn't any reason to have futures and forwards, since today's conversion rate is a highly probability predictor of the exchange rate days/months/years from now. It's also worth noting that you need a financial intermediary to obtain a forward contract from, and the pegged USD/Yuan currency presents two problems:

- no need for a forward
- extremely high risk for the financial intermediary in the event that China does float their currency, who knows where the exchange rates will move to?

 

[nicholaf]

Quote from TGM:

I agree with you. We should be careful with demographics. We have to remember that the Chinese are dominant in many parts of Asia (Singapore etc). We might see a Thai girl and not realize that she is really Chinese.

You are right to point out that this imbalance could drive the Chinese men toward financial success so that they can get a wife. This is already happening from what I hear. Jim Rogers wrote about the most successful Chinese men in Siberia taking Russian wives once they had "made it".

I do not have any links for you in regards to Male/Female imbalances and War. I don't have the time to pull them up right this minute. It really depends on the society as a whole. But young men either got to work or war historically. If you have social unrest etc. the authorities may think it wise to create an enemy (there is always an enemy around!) and go to war ----better to do that than risk a revolution and then end up with the leaders getting their heads chopped off!

Just look at China right this minute. They are protesting textbooks in Japan (imagine a protest of textbooks in another country ---absurd---any time you see something this absurd---there is probably something else going on). Pent up frustration.

The Chinese government sees it better to allow people the right protest Japan ---than to overthrow the Chinese Government. The Chinese Govt has a LONG memory and is fearful of another Tiananmen Square calling for the a change within China! Much better to allow the people to protest another country.

They have used history to create an enemy. But Why? A large population is difficult to control. Especially if the men are NOT getting women because there is a shortage. How this is going to effect the future is anyones guess. How many men are protesting the Japanese because they are NOT getting laid? I cant tell you.

I disagree on the part that Chinese are venting their anger towards Japanese because of pent up frustration.....There has long been a deep ill-will towards Japanese for all Chinese, whether in China, Hong Kong, Taiwan, etc etc. It has also to do with Japan wanting to be part of the UN security council. I myself am Chinese (from Hong Kong) and understand this ill-will (although i don't have it) but my parents and my relatives just don't like the Japanese purely because of the history. What you are seeing right now has actually been in the hearts of many Chinese and its just bubbling to the surface now.

For the main question, China will very unlikely float the Yuan anytime soon. I agree with another poster than stability is the main issue, and they are willing to keep stability at all costs.

 

[TGM]

Quote from nicholaf:

I disagree on the part that Chinese are venting their anger towards Japanese because of pent up frustration.....There has long been a deep ill-will towards Japanese for all Chinese, whether in China, Hong Kong, Taiwan, etc etc. It has also to do with Japan wanting to be part of the UN security council. I myself am Chinese (from Hong Kong) and understand this ill-will (although i don't have it) but my parents and my relatives just don't like the Japanese purely because of the history. What you are seeing right now has actually been in the hearts of many Chinese and its just bubbling to the surface now.

For the main question, China will very unlikely float the Yuan anytime soon. I agree with another poster than stability is the main issue, and they are willing to keep stability at all costs.

I never said the Chinese did NOT have historically grievances with Japan. Nor did say that some of the protestors were NOT angry at Japan for historical events like the "rape of Nanking".

But one thing is for sure. You are NOT allowed to protest in China unless the Govt allows it! I read a good interview on Reuters of a shop owner that services many of the Japanese that are doing business with China and the Chinese man that runs the business stated that some protestors were pissed of at Japan and some were just pissed off!

I do not believe the Chinese Govt will be successful in guilt tripping Japan. The Communist Govt is trying to create moral superiority when they themselves are responsible for many deaths. The Chinese people are smart enough to realise that the Chinese textbooks do not tell the whole truth either.

I would like to see what the Chinese would like the Japanese to teach their children about Japanese history. I could only imagine. I am guessing it would be the constant guilt tripping and self hatred forced downt the throats of many Western children day in and day out (ie especially the Germans eeesh!).

It should be interesting to see if Japan does get a seat on the security council.

 

[nicholaf]

Quote from TGM:

I never said the Chinese did NOT have historically grievances with Japan. Nor did say that some of the protestors were NOT angry at Japan for historical events like the "rape of Nanking".

But one thing is for sure. You are NOT allowed to protest in China unless the Govt allows it! I read a good interview on Reuters of a shop owner that services many of the Japanese that are doing business with China and the Chinese man that runs the business stated that some protestors were pissed of at Japan and some were just pissed off!

I do not believe the Chinese Govt will be successful in guilt tripping Japan. The Communist Govt is trying to create moral superiority when they themselves are responsible for many deaths. The Chinese people are smart enough to realise that the Chinese textbooks do not tell the whole truth either.

I would like to see what the Chinese would like the Japanese to teach their children about Japanese history. I could only imagine. I am guessing it would be the constant guilt tripping and self hatred forced downt the throats of many Western children day in and day out (ie especially the Germans eeesh!).

It should be interesting to see if Japan does get a seat on the security council.

That is true.... protests are only allowed when the Gov allows it, and in this case it is tacitly allowed.. lol

 

[mercure160]

Quote from Rearden Metal:


A freely traded Yuan would cause Chinese labor costs to SKYROCKET, IMO.
The U.S. would suffer inflation & rising interest rates, and China would suffer unemployment. The Chinese government is very cautious about this for good reason.

No because china is not having any major trade surplus with the rest of the world. consequently freely trade yuan will not change its value compared to dollars by much.

the problem is USA trade deficit is the inability for the US to sell anything to the rest of the world. not the problem of chinese labor. China might be selling a lot to US, but it is buying a lot from the rest of Asia so its balance is neutral.

 

[mercure160]

Quote from steeldust:

hi all. i was just thinking about if the chinese float the yuan,what would the effects be on the USD and US treasury markets? since china holds the massive USD reserves,would they start to unload them or keep them as a hedge. how about US bonds? would they sell them off also? or would they add to their reserves? any comments or story links would be appreciated.

currency crisis leads to strong imported inflation like in Mexico 94.
but i don't see the crisis yet. the problem will come when countries realise they don't need to hold large amount of dollars anymore. They will need yuan to buy chinese goods so many countries will start to make reserve in yuan rather than dollars.

 

[TGM]

Quote from mercure160:

currency crisis leads to strong imported inflation like in Mexico 94.
but i don't see the crisis yet. the problem will come when countries realise they don't need to hold large amount of dollars anymore. They will need yuan to buy chinese goods so many countries will start to make reserve in yuan rather than dollars.

There really is no comparison to this scenario to get a grip on what may happen. The US has reserve status so any comparison to any other country is really impossible. All commodities are priced in dollars etc. Who knows how this will go.

China is not perfect and could potentially have alot of problems as well. One thing I do know the last time we changed reserve status currencies was from Pounds Sterling to Dollars and that was the great depression. However, I don't see it going this way again. Not that it couldn't.

I don't know that China will have reserve status. They should on paper----but that does not mean anything. Hell, Japan should have reserve status on paper and should have had in since the late 80's ---but they don't. Of course, China has the potential to have a deep expanding market and a massive population (as well as a successful diaspora). If there is not a revolution there that splits up China (always a possibility). China has always been challenged historically with holding on to it's territory. Then again. There are no Mongols around and I don't see the Japanese doing anything in China except making money! We will see. It is all up to the Chinese.

 

[Peter35]

Quote from steeldust:

hi all. i was just thinking about if the chinese float the yuan,what would the effects be on the USD and US treasury markets? since china holds the massive USD reserves,would they start to unload them or keep them as a hedge. how about US bonds? would they sell them off also? or would they add to their reserves? any comments or story links would be appreciated.

Japan competes vigorously against China in many export markets. Therefore, if China does revalue the Yuan, and if as expected the Yuan rises in value, Japanese products will instantly become cheaper vis a vis their Chinese counterparts. This increased competitiveness is expected to expand Japanese exports and benefit the yen against both the euro and the dollar. European officials expressed a strong displeasure at the fact that euro has absorbed most of the recent dollar weakness while the Asian currencies have remained steady. News of Yuan revaluation is likely to change that dynamic by attracting more capital flows to Asia which would cause EUR/JPY to decline. Note the quick market reaction to the surprise Bank of China rate hike announcement last October: many market participants believed this to be the first signal in the Yuan revaluation process. Should People’s Bank of China actually revalue the Yuan, the downward impact on the EUR/JPY is likely to be far more lasting.