China Digital Times

China news tagged with: currency evaluation (7)

• China Yuan Revaluation Prospects Heat Up

  

  Investors may receive a surprise from the Chinese government this year if it decides to reevaluate the currency, which the Wall Street Journal argues is looking more likely:

  Most economists have given up on China snapping the yuan’s peg to the dollar, which has persisted since the middle of 2008, as the emerging economic superpower has repeatedly rejected the idea.

  However, the picture has changed somewhat this week, as the Chinese authorities have made it clear that they are determined to tackle early signs of overheating in the economy. Now, some heavyweight economists are starting to take the idea that currency strength could be a useful tool in that fight more seriously.

  Speculation started to gather Tuesday, when the People’s Bank of China slapped tougher reserve requirements on its banks to pinch rampant lending, prompting market watchers to mull the chances of a straightforward interest rate rise.

  » Read more
  • January 14, 2010 12:53 PM

• Ben Simpfendorfer: China’s Yuan Ambitions

  

  From the Wall Street Journal:

  China is playing a growing role in discussions over solutions to current economic problems. Much of the talk has focused on money — whether Premier Wen Jiabao’s concerns about the value of China’s U.S. treasury investments, or the People’s Bank of China’s paper floating the idea of a de-dollarized international monetary system. Up to now, one limit to China’s ability to contribute to global monetary reform has been its own currency policy, particularly the fact that the yuan is not convertible. However, now there are tentative signs that’s starting to change.

  Beijing has signed currency swap agreements with six central banks: Hong Kong, Indonesia, Korea, Malaysia, Belarus and most recently Argentina. These swaps permit those central banks to sell yuan to local importers in those countries who want to buy Chinese goods. This is particularly useful for importers struggling to obtain trade finance as a result of the financial crisis. As such, it’s consistent with China’s desire to participate in the Group of 20’s efforts to support trade financing.

  China has long wanted its currency to play a more important role in the global financial system. These swap arrangements come in the context of that broader policy aim. The broader policy goal also has a more practical function in reducing currency exposure and transaction costs for Chinese exporters. The rise in the yuan’s value relative to the dollar in early 2008 was a reason why some Chinese exporters went bankrupt. The ability to settle trade in yuan would reduce this risk in the future.

  » Read more
  • April 5, 2009 11:32 PM

• IMF: China’s Currency ‘Substantially Undervalued’; Asian Growth to Slow

  

  The IMF has called on China to allow for greater exchange rate flexibility. From AFP:

  In its half-yearly World Economic Outlook report, the IMF said a more flexible yuan, or renminbi, would help China shift growth momentum towards domestic sources and make its monetary policy more effective.

  “In the IMF staff’s view, the renminbi remains substantially undervalued relative to medium-term fundamentals,” the report said.

  The IMF further predicted 9.7 percent economic growth for China in 2008 and 9.3 percent in 2009, down significantly from 11.9 percent in 2007, saying this was “partly because of slowing exports”.

  Even so, it argued China’s heavily export-dependent economy would be better off if it allowed its currency to rise further.

  At the same time, the IMF has warned that Asian economies in general will face slowing growth in response to the ongoing financial crisis in Western countries. From Forbes:

  ‘The main concern is that a buildup of stress in the global financial system and a sharper-than-anticipated global slowdown could further weigh on activity,’ it said.

  Regional locomotives China and India will also experience slower growth on weaker exports, but should continue to be supported by solid private consumption, it said.

  For more on this topic, see “On The Alert: Will China’s Financial Market’s Follow The US?” via CDT.

  » Read more
  • October 8, 2008 10:37 AM

• U.S. Treasury Secretary Vows to Press for Change in China

  

  From the International Herald Tribune:

  Paulson, meanwhile, will be leading a delegation of Cabinet members to meet with their Chinese counterparts in Annapolis, Maryland, next week at what could be the last round of high-level economic talks under the so-called strategic economic dialogue started in 2006.

  U.S. officials say that while a number of specific trade issues have been resolved over the past two years, they are increasingly concerned that China is backtracking by using regulations, standards and other means to favor Chinese industry and shut out foreign competition.

  Paulson said Tuesday that he would press for a more open Chinese economy and convey “the concerns of American companies that China’s investment regulations are opaque and seem in many ways to be designed to favor China’s ‘national champions.”‘

  Xinhua has a slightly different take on the story with their report headlined “Paulson: economic relations with China growing in positive direction.” See also CDT’s previous post: “Paulson Pledges Robust Engagement With China.”

  » Read more
  • June 11, 2008 2:10 PM

• Slow FX Inflows by Separating Gas and Fire

  

  Wang Tao, an economist from Bank of America, writes on slowing foreign exchange inflows, the weakening dollar and Yuan rate revaluation. From Caijing.com.cn:

  By closely linking the yuan with a sharply declining U.S. dollar, China is importing a highly accommodative U.S. monetary policy, which sits oddly with Chinese monetary policy considerations. On top of China’s already large, basic balance of payment surplus, speculative inflows likely have risen in recent months as yuan appreciation expectations have become entrenched. A combination of a one-off revaluation of the Chinese currency and tightened capital controls by government regulators may help break the expectation in the near term, although these steps would be highly controversial.

  The speed of China’s foreign exchange reserves accumulation has been nothing short of astonishing. In a previous report (see “Country Alert China, Difficult 2008 Part I: The Speed of FX Accumulation,” March 17, 2008), we identified the influx of foreign exchange as one of the biggest challenges facing Chinese policymakers this year. Our estimate puts the actual increase of net foreign assets in 2007 at between US＄ 570 billion and US＄ 685 billion, and we are not surprised that FX reserves increased by more than US＄ 120 billion in the first two months of this year.

  » Read more
  • April 28, 2008 9:53 PM

• Understanding the China Market

  

  The Journal of Indexes (“The Book of Record for the Index Industry”) has issued a special edition on the Chinese market called Understanding China, with contributions from some prominent economists and business leaders. The articles include:

  *Is China For Real? by Jim Wiandt

  *The Chinese Market Considered by Burton Malkiel

  *International Equities by Steven A. Schoenfeld and Stefanie Jaron

  *The Value Of Currencies by Tom Haines

  *China Forum by Matthew Hougan

  *A Window On The Chinese Markets by Heather Bell

  *Talking Indexes – Liquidity by David M. Blitzer

  *Benchmarks For Fiduciaries by Brian J. Jacobsen

  *The Curmudgeon – The Great Wheel of China by Brad Zigler

  » Read more
  • February 19, 2008 4:52 PM

• Democrats Urge Bush on Trade Grievances

  

  From AP, via washingtonpost.com:

  House Democrats, citing the rising U.S. trade deficit, urged President Bush on Thursday to take action against China, Japan, the European Union and six other countries accused of unfair trade practices…

  The administration, they said, should pursue cases against:

  -China for currency manipulation and intellectual property rights violations that hurt the U.S. recording industry. China should be put on a “priority watch list” of countries that present significant piracy problems for U.S. copyright holders if consultations and a WTO dispute resolution case don’t solve the problem, they said.

  In another story, AP also reports that, “China faces more trade and investment barriers in the United States than anywhere else, a government report said, echoing a similar U.S. report accusing China of harming American businesses through such obstacles.”

  » Read more
  • April 1, 2005 9:42 AM

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