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YUAN Revaluation = Bullish!!
- Thread starter areyoukidding?
- Start date
Quote from areyoukidding?:
So can someone explain how the chinese will buy more american goods, or does this just hurt profit margins of manufacturers and retailers?
I have an economics degree and cant figure it out.
I don't have an economics degree, but couple of points come to mind.
They consume massive amounts of natural resources, a stronger yuan means cheaper imports for China. How does it help us in the USA? not a whole lot. China does'nt plan on buying much from us.
As their domestic market grows, I assume a stronger yuan will shift entrepreneurial energies from export oriented industries to industries geared toward the domestic market. Probably will create more service sector jobs, more employment, more consumers. For Chinese companies that are export oriented, I think their domestic market will end up being their biggest customer after a decade.
Also, just because the Yuan is freely floated, does'nt mean China won't/can't buy USD like the Japanese are doing to keep the Yen from getting too strong. So, the Yuan floats freely, but it can still be kept relatively weak by the chinese selling their own massive levels of debt and then using the proceeds to finance purchase of the USD.
Inflation in the US is in check because of cheap imports. Imports will still be cheap with a stronger Yuan since manufacturers (esp. in garments) are already shifting to lower cost Vietnam, Cambodia etc.
---- Can someone explain how this is good for the US ----
intermediate term prospective (could be):
- weaker dollar
- higher commodities
- higher bond yields
- higher US inflation, higher rates
- lower stocks
+
- higher mortgage rates
- lower housing prices
intermediate term prospective (could be):
- weaker dollar
- higher commodities
- higher bond yields
- higher US inflation, higher rates
- lower stocks
+
- higher mortgage rates
- lower housing prices
For all i know, it wasn`t the chinese who wanted the revaluation. So revaluation for cheaper imports of crude and minerals in dollar terms doesnt make a lot of sense. Why would china go for only 2% revaluation and not 20% in that case.?
As for the effects like job shifting to India or Africa. That could possibly happen if the currency change was like 10% or more. India and China`s nature of trade with the US is very differentiated in the sense that China is more into manufacturing.
India still has to see that kind of manufactruing prowess to compete with China, a 2% currency change does not translate to shifting of manufacturing to India.
Btw, How does hedge funds use Wal-Mart shares for speculating in the Yuan. The argument was that WalMart is heavy on Chinese import . How significantly is Wal Mart affected by the Yuan change?
Or is it just speculation
As for the effects like job shifting to India or Africa. That could possibly happen if the currency change was like 10% or more. India and China`s nature of trade with the US is very differentiated in the sense that China is more into manufacturing.
India still has to see that kind of manufactruing prowess to compete with China, a 2% currency change does not translate to shifting of manufacturing to India.
Btw, How does hedge funds use Wal-Mart shares for speculating in the Yuan. The argument was that WalMart is heavy on Chinese import . How significantly is Wal Mart affected by the Yuan change?
Or is it just speculation
why do people make a big deal about 2% anyway? I've seen floating currencies fluctuate that much in one day several times and there were not radical changes afterwards. A 2% drop in CDU5 gives us about 8050- that simply puts it at the midpoint of the last 2 month rally. EC has fallen over 10% this year.
off topic, here's a good one for ya. We bought a new bedroom set in early december and it was just delivered in june. I kept calling and was getting pissed, but the story was that the furniture factory was being moved from China to Vietnam to save costs!
off topic, here's a good one for ya. We bought a new bedroom set in early december and it was just delivered in june. I kept calling and was getting pissed, but the story was that the furniture factory was being moved from China to Vietnam to save costs!
cause and effect in economics are dynamic, or, as Soros puts it, "reflexive."
Regarding 2% "only".
Economists believe the "fair" revaluation should be 15%-40%, but China would never rattle the international markets by making a huge move all at once. This is bad for everybody.
I think there will be growing pressure on the Yuan to revalue much further and this will happen in many steps over years.
I agree with most of you people on the effects on the USD, interest rates, Oil, housing markets, etc...
Economists believe the "fair" revaluation should be 15%-40%, but China would never rattle the international markets by making a huge move all at once. This is bad for everybody.
I think there will be growing pressure on the Yuan to revalue much further and this will happen in many steps over years.
I agree with most of you people on the effects on the USD, interest rates, Oil, housing markets, etc...
Quote from mhashe:
As their domestic market grows, I assume a stronger yuan will shift entrepreneurial energies from export oriented industries to industries geared toward the domestic market. Probably will create more service sector jobs, more employment, more consumers.
Service, advertising, marketing, I-banking, these are all US dominated industries. Look at Citibanks global locations, they are not messing around. This could be a corporate move to create a big American type consumer market in China.
But this can only make goods more expensive in US. Plus what about that minimum CC payment hike from 2% to 4% of balance. That's a clamp on consumer credit. Hmm.