Chinese Premier Wen Warns of `Disaster' in Rapid Appreciation of the Yuan

[pampango]

Source: Bloomberg

China stiffened its opposition to a rapid appreciation of the yuan, setting the stage for a confrontation over exchange rates at this week’s international monetary meetings in Washington. Premier Wen Jiabao said China will stick to its policy of gradually increasing the currency’s flexibility and lashed out at European Union leaders for teaming with the U.S. to pressure the Chinese government.

“Europe shouldn’t join the choir” clamoring for a higher yuan, Wen told a business conference before an EU-China summit in Brussels today. “If the yuan isn’t stable, it will bring disaster to China and the world. If we increase the yuan by 20- 40 percent as some people are calling for, many of our factories will shut down and society will be in turmoil.”

Noting that Europe’s exports to China still rose more than 40 percent in the first half, Wen rejected a call by European Commission President Jose Barroso for an “orderly and broad- based appreciation” of the yuan. “If China’s economy goes down, it’s not good for the world economy,” Wen said. Time constraints were given as the reason for cancelling a post-summit press conference with Barroso and EU President Herman Van Rompuy.

China’s economy will grow 10.5 percent in 2010 and 9.6 percent next year, beating rates of 1.7 percent and 1.5 percent for the 16-nation euro region, the International Monetary Fund said today.

Read more: http://www.bloomberg.com/news/2010-10-06/chinese-premier-wen-warns-of-disaster-in-rapid-appreciation-of-the-yuan.html

[DJ13]

1. “If China’s economy goes down, it’s not good for the world economy,”

And if the rest of the world goes down because you keep your money too cheap to allow the other countries to rebuild, then China still goes down.

[madrchsod]

2. so wen is afraid the people might get pissed off....

to bad...

[h9socialist]

3. In all fairness, it's not just an undervalued Yuan that's the problem . . .

It's also those sub-human wages and working conditions that lure our Sultans of Commerce to China. Afterall, these bastards didn't get rich by foregoing opportunities to exploit desperate people.

[kenfrequed]

5. The two are interlinked

and related.

One of the reasons that China can lock in the low rates for its wages is because they keep their currency from inflating. When this changes it will pull the plug on China and the cheap jobs will spiral all over the place as companies desperately search for the bottom of the barrel.

In all likelihood this will result indirectly in American investments being dumped by China including investments in American Dollars being pumped out in every direction which will further the spiral in the rate in the dollar while the cost of soft manufacturing goods and consumer electronics fluctuates wildly.

Consumer sales will likewise bounce about as there will be too many dollars chasing too few goods. The resulting strain and the collapse of the currency market will collapse the derivative market as we stumble into full scale and Deep recession.

This is probably unavoidable.

[KurtNYC]

6. Hopefully what the West is looking for is to be able to sell our goods in China

As their economy grows 10.5%. There are many things which China does not have or make. Newly affluent Chinese have money to spend and we should want and work for a piece of that. Luxury goods, services and various foods should be flowing into China from the West. Taking the Yuan to 5 to the USD would help but that is only part of what it will take to further open China as a market (and start to balance the trade deficits).

China is far from the cheapest labor in the world. Their edge is an abundance of labor PLUS their strategic and centrally planned investment in factories. We can complain all we want and we may get the Yuan up but if we don't invest in OUR factories then we can't put our people to work. In some ways this Chinese government has done well for the people of China. With the world economy in a slump, China now has 4 weeks per year that are national holidays -- the factories shut down and workers spend time with their families.

Also, China is now the best source for solar panels and the whole world will benefit from the reduced cost of solar energy. The Chinese government can and does plan 40 to 100 years ahead. They are already dealing with the coming end of oil energy (and a shortage of fresh water). They addressed their population issue with the one child policy starting in 1978. I could go on bc there are many things that China is doing better than others. IMHO our bias keeps us from seeing and imitating the things which have worked for China.

edit for typo

[laundry_queen]

7. That is what

one of my college instructors mentioned recently. He said within 25 years we will have a great worldwide depression, worse than the 30's, and this time it will start with China and the effects will be the worst in China. The way he explained it made perfect sense. Wish I'd have taken notes.

[skoalyman]

4. poor Premier Wen Jiabao

:nopity: :nopity: :nopity: :nopity: like I give two shits