China revalues yuan

[Syberus]

Sorry if there's already a topic for this... but I didn't see one when I looked. I am admittingly not real edumicated in economics.. having only had a few classes, but I found this to be pretty interesting. What do you guys think about this?

http://money.cnn.com/2005/07/21/news/international/china_yuan/index.htm

[Warriorbird]

On the surface, appealing, but could lead to more troubling moves. That Unocal thing bothered me. Then again, Australia's done similar to one of our huge markets, the media.

[Apotheosis]

well, now whirlpool made a nice bid on maytag (or vice versa), and the chinese company seeking the firm that was up for sale, has pulled out.

CNOOCC bid for Unocal is stalled for now, but if they can get through all the red tape and publicity hurdles, they'll probably end up buying it.

[Drew]

Still not free market, although a bit of a step in the right direction. I doubt they will give up much control over it though.

[Atlanteax]

This "revalution" of the Yuan is merely a cosmetic change. Its replacement is an undisclosed "basket of currencies" which is likely still heavily US-dollar dependent, and there's the built-in rigidity to the pricing structure (can only move by .3% which becomes the next mid-point). For all practical purposes, it still functions as a peg.

However in time, China will be forced to let the Yuan float freely, as there is no way that it could win a Trade War with the US and the EU (which is mostly in the same boat with the US in regard to the Yuan).

For those who go "but we import so much from China..." are forgetting that China specializes in exports that are cheap labor-intensive... which indicates that the US/EU will have no trouble turning to Malaysia or other SE Asian countries, or even African countries for the same goods being imported from China.

However, China does need goods produced by the US/EU which China will not be able to obtain elsewhere.

Combine both of those elements plus the Chinese dependence on Western investment means that the Chinese are forced to stall for time, as it is only a matter of time before we see a free-floating yuan.

Hopefully sooner than later, of course. Meanwhile, the US will be taking advantage of the leverage that it now has over China. Nevermind that China is currently going to be unable to meet most of their WTO commitments by the deadlines, putting China in even more of a bind.