China "revalues" its currency

[BigCombo]

Time Magazine  http://www.time.com/time/asia/magazine/article/0,13673,501050801-1086198,00.html

Monday, Jul. 25, 2005
"Over the past year, wild speculation and furious debate have turned the future of the Chinese currency, the yuan, into the hottest and most polarizing topic in the global economy. Pegged to the U.S. dollar since 1994?meaning that when the value of the greenback rose or fell, so did the yuan's?China's currency had come to embody the industrialized world's fears of a hypercompetitive mainland staging a hostile takeover of global manufacturing. Led by the U.S., critics accused China of clinging to the dollar peg in order to keep the yuan artificially weak, making its exports extra cheap and fostering a worrisome trade gap with the U.S. that ballooned to a record $162 billion in 2004. Unless Beijing changed its currency policy, a trade war loomed. Still, Beijing wouldn't budge, leaving businessmen and investors across the globe guessing as to when this uneasy status quo might finally change?and how dramatically.

Although considerably more muted than expected, the answer came on July 21, when the People's Bank of China posted a notice on its website announcing the end of the yuan's peg to the dollar. Citing its wish to "improve the socialist market economic system in China," the bank set the yuan at 8.11 to the dollar?a 2.1% increase in its value?and decreed that henceforth it would trade within a narrow band of 0.3% each day against a basket of (unnamed) currencies. Now that the yuan is allowed to float, even only slightly, its value should better reflect China's buoyant economic growth and its booming trade with the rest of the world"

Any thoughts?

[SLCPUNK]

Interesting, but over my head......

[Walk]

This is Europe's response to the recovering US economy and the strengthening dollar. They've gotten China to revalue the Yuan to hurt our dollar's value so the Euro can continue to rise. China has some type of deal with Europe to push this through to hurt American currency.

It's going to backfire. A temporarily weaker dollar will only help exports and create jobs for us. In the long run, we will recover and beat the Yuan back down. Their unfair trade advantage is going to be history, and American manufacturing is going to make a major comeback with this news. 

[Rain]

Wow that's being a little paranoid here Walk ... A strong Euro is hurting our economy right now ... less exportations and less tourism ... and a rise of the unemployment rate ! 

[Where is Hassan Nasrallah ?]

but all countries are slowly building barriers and protection agains chinese' eco strategy.

the omc (sp?) said that they will make the yuan go up.

[BigCombo]

A weaker dollar theoretically will decrease US imports from China.  But capital is so liquid nowadays that even if the yuan doubles in strength against the dollar, companies will simply move manufacturing to anywhere else in Asia.  The US has to realize that it will continue to lose manufacturing jobs; and therefore promote better education of its people.  Protectionism solves nothing; it simply screws the consumer. 

China will not let its currency float against the dollar because it holds so much US debt.  So if the yuans stregthens against the dollar, Chinese held US debt is worth less.