Readers of The Chinese Century know it begins with China allowing the Yuan to float against the Dollar, and then pushing the Yuan up in the market.
The first step toward that reality was taken today. (The image is from the China Daily article.)
Instead of having a fixed rate against the dollar, China will let the Dollar rate float against a "basket of currencies." So if the Dollar falls against, say, the Yen (and it did in response to this news) or the Pound (ditto) or the Euro (mega dittoes) further moves might be made.
The Optimist Club, otherwise known as Wall Street bulls, suggested this will make our exports more competitive. That would be great if we had exports. In fact, it makes imports more expensive. It imports inflation.
It also reduces China's own production costs, because oil (for now) is priced in Dollars. With fewer Yuan needed to buy Dollars, the price of oil to China goes down.
The Optomist Club, again, thinks this might presage a 10-15% move in the Dollar-Yuan rate over the next 18 months. But why should it stop there? Also, this makes it easier for Chinese company to buy American assets -- oil companies, land, your mortgage -- and control America's economy.
The blame for this falls squarely on the Bush Administration, which has been in power for over 4 years and has done nothing to change the present trends. We have done nothing to regain our technology competitiveness, nothing to encourage technology education, nothing to bring tech manufacturing back to even the Western hemisphere (let alone the U.S. -- even Mexico is hemorrhaging jobs to China.)
Anyone who voted for this idiots, either in 2000 or 2004, bears responsibility for this. You don't notice, don't care? You will when you get laid-off, Sparky. I, for one, do not welcome our new Chinese overlords. Bush does. Do you?
Dana Blankenhorn has been a business journalist for over 25 years and has covered the online world professionally since 1985. He founded the "Interactive Age Daily" for CMP Media, and has written for the Chicago Tribune, Advertising Age, and dozens of other publications over the years.
1. Jim A. on July 22, 2005 03:44 PM writes...
This paragraph is TOTALLY nuts:
"The blame for this falls squarely on the Bush Administration, which has been in power for over 4 years and has done nothing to change the present trends. We have done nothing to regain our technology competitiveness, nothing to encourage technology education, nothing to bring tech manufacturing back to even the Western hemisphere (let alone the U.S. -- even Mexico is hemorrhaging jobs to China.)"
Whatever political views you have, you can not reasonably suggest that anything at all done over the last 4 years had anything to do with this. Efforts, or lack there of, to increase investment in technology takes 5-10 years before they even begin to show their fruits. Education takes 10-20 years before that shows up. So how does the blame for this squarely fall on Bush??? Duhh!!
And as for the first shoe of the Chinese Century coming true....predicting the float of the Yuan is not an accomplishment. Every economist has been saying this has to happen, and if anything the big news is how it has not happened yet. But your fiction hinged on the Chinese dumping part of their huge billions of US currency. You can't have it both ways....if the Yuan floats (and appreciates vs. the dollar...which it will), then yes import costs to china fall, but just as importantly so does the value of the US debt they hold. So all your fear that the Chinese hold too much US debt becomes a stabilizing factor not a destabilizing factor.
Permalink to Comment2. W Sanders on July 29, 2005 01:30 PM writes...
Dana, I'm not sure there is anything the government can do with regards to competing with China without massive social engineering. China is where the US was in the 1890s, just when the US imperial era began - massive oligarchies, corrupt politicians, indiscriminate oppression of dissenters. "Speak softly and carry a big stick" - might be described as China's foreign policy now. (Although China could use a charismatic, incorruptible, farsighted leader like TR.)
It's hard for our self-indulgent, me-first mentality to compete with values like that. The question isn't so much how we can beat China at the trade game, but how our lifestyle will adapt to coexist with our new overlords, and how we can help China avoid the mistakes we made in the 20th century.
Permalink to Comment3. Roy Troxel on July 29, 2005 06:02 PM writes...
how we can help China avoid the mistakes we made in the 20th century.
Ha, ha, ha! I say, let 'em make the mistakes we made!
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