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china. ing s bags cannot be trusted
March 25 (Bloomberg) -- The U.S. and China are on a “collision course” over the value of the Chinese currency and investors are underestimating the disruptions for global financial markets, according to Nouriel Roubini.
“The risk of a collision course on China’s currency peg and a wider trade rift between the world’s largest debtor and creditor nations has risen significantly in recent months,” Roubini, a professor at New York University, wrote in a note to clients. “Markets do not seem to be pricing in the potential consequences of the U.S. labeling China a currency manipulator, which could be significant even if both sides avoid taking immediate bilateral actions.”
There is a 50 percent chance that the U.S. government will label China a currency manipulator, said Roubini, who issued his comments after attending a private meeting for Western delegates with Premier Wen Jiabao at the annual China Development Forum.
Labeling China a currency manipulator would make it easier for companies to seek import duties, U.S. Senator Charles Schumer said this week. China will balk at allowing the yuan to appreciate if that happens, Donald Straszheim, director of China research at International Strategy & Investment Group, said yesterday.
China’s Shanghai Composite Index fell the most in two weeks today, led by shipping companies, on concern rising trade tensions will hamper the recovery for exports. Yuan forwards declined after China reiterated it won’t yield to foreign calls for currency appreciation to resume.
‘Foreign Pressure’
“The Chinese government will not suc b to foreign pressure to adjust our exchange rate,” Vice Minister Zhong Shan told reporters during a trip to Washington to meet with U.S. officials and lawmakers. “To force the appreciation of the renminbi will be counterproductive.”
The Treasury Department is “seriously considering” labeling China a currency manipulator in an April 15 report, Schumer said March 23.
China has kept the yuan at 6.83 per dollar since mid-2008 to shield exporters from the global recession and a contraction in world trade.
The nation may post its first trade deficit in six years this month, a shift that may reinforce the government’s reluctance to end the yuan’s peg to the dollar, Standard Chartered Bank Plc said this week. China’s exports surged 46 percent last month.
China will limit the yuan’s appreciation to 4 percent over the next 12 months because of a “super cautious” outlook on the global economy, Roubini said in a March 8 interview.
Roubini, who runs his own global economic strategy firm, correctly predicted a “hard landing” for the world economy in 2007 and has become famous for his pessimistic projections.
china. ing s bags cannot be trusted
usa is the biggest currency manipulator on the history of the planet
they have absolutely no reason to listen to what we want them to do
Roubini Warns On U.S./China ‘Collision Course’
Fresh from a meeting with Premier Wen Jiabao at the annual China Development Forum, Nouriel Roubini has put out a note to his clients.
The U.S. and China are on a “collision course” over the value of the Chinese currency and investors are underestimating the disruptions for global financial markets, according to Roubini.
“The risk of a collision course on China’s currency peg and a wider trade rift between the world’s largest debtor and creditor nations has risen significantly in recent months,” Roubini wrote in a note to clients. “Markets do not seem to be pricing in the potential consequences of the U.S. labeling China a currency manipulator, which could be significant even if both sides avoid taking immediate bilateral actions.”
There is a 50 percent chance (whatever a 50% chance means) that the U.S. government will label China a currency manipulator, said Roubini.
That the U.S. continues to harass China for propping up the dollar is quite astounding. Do U.S. officials really want to see what will happen to the dollar and the ability of the Treasury to sell debt overseas, if China stops supporting the dollar.
China's propping up of the dollar is, of course, based on wrong-headed mercantilist thinking that exports are superior to imports. Such thinking by the Chinese government, and the resulting follow-through actions, lowers the standard of living for the average Chinese resident, but is a boost to the standard of living of the average American, who experiences lower prices than would otherwise be the case.
Any "success" the U.S. achieves in getting China to stop propping up the dollar puts the U.S. in danger of much stromger inflation and an inability of the Treasury to raise money anywhere near the current low rates. Rather than berating China, U.S. officials should do everything they can to keep China's policy in place.
Right, but by keeping the standard of living down for Chinese workers, it also draws in American businesses who use these low-cost Chinese workers, correct?China's propping up of the dollar is, of course, based on wrong-headed mercantilist thinking that exports are superior to imports. Such thinking by the Chinese government, and the resulting follow-through actions, lowers the standard of living for the average Chinese resident, but is a boost to the standard of living of the average American, who experiences lower prices than would otherwise be the case.
By allowing the dollar's worth to be properly assessed, as it were, is to devalue Chinese workers to American businesses. (Note: I don't have any sort of economics degree, so if I'm way off, feel free to provide corrections. Dr. Doom here was one of the guys who was right on alot of the financial crisis now, so his word carries alot of weight in my eyes.)
Genuinely not sure what he means by "keeping the standard of living lower" for the average Chinese. It is somewhat mixed for their economy overall, given how many people they have working in exporting factories.
The thing about currency pegs is that as the distortion becomes greater and greater than market reality, it becomes exponentially harder to maintain.
The overall size of the financial markets globally dwarfs the ability of ANY government, even the US to really do more then mildly influence.
Their currency peg encourages domestic Chinese firms to borrow from American banks, as the markets know this. The renmenbi/yuan MUST appreciate eventually, and the dollar loans these firms take out will get really cheap for them to maintain as their currency lifts.
Another factor here is that oil is traded in dollars. By pegging their currency to the dollar, as the dollar drops, oil gets relatively more expensive.
For a country that requires more and more oil imports, that will eventually drag their economy more and more as the disparity grows. I have come across some figures stating that Chines oil consumption is growing at a rate 7 times faster than that of the US even when our own economy is growing.
This mean that, in essence, they are making the costs of that imported oil all the more greater.
If, tomorrow, they unpegged their currency and suddenly woke up to the fact that the price of imported oil suddenly dropped by 33%, as the Economist's most recent "Big Mac Index" implies, they would start buying MORE oil. Where would that send the price of gas at the pump?
I don't think this is as big of an issue as some do, obviously. The market WILL FORCE the Chinese to appreciate their currency at some rate as the US economy flounders for the next few years, and the Chinese economy continues to grow.
You are correct. THere is even some new data suggesting that as jobs such as lower wage factory jobs go away, the administration here on the part of large-multinational companies tends to grow. Meaning that the net effect of such outsources to the overall economy is least not as negative and at most a net positive.
Keeping the value of the renmenbi/yuan artificially low relative to the dollar really attracts US firms to China, as it effectively subsidizes their investments in that country.
The effects are complex, and hard to really, truly quantify.
Roubini was right about the financial crisis, but remember to keep that in perspective. Financial conditions are notoriously hard to predict.
He is a credible voice to be sure, but be wary about placing to great an emphasis on any one source, at the expense of missng out on a wider consensus.
RG, thanks for the double-check. I think the idea of jobs going overseas is probably what's behind the administration's idea of stoping the practice of artificially inflating the dollar.
You're right about multiple sources; but so many of those sources seemed to be wrong about so much, and I'm not an economist by nature. Hence why I put stock in Dr. Doom; however I'm a skeptic by nature and don't think any one commentator has the correct answer to every situation. At least he wasn't as glaringly stupid as... Friedman, I believe?
The one who said he was wrong about markets self-correcting? How big of a blind spot can you have, really?
Wow, he predicted the housing bust....B.F.D., so did half the people in this forum...Roubini is a Iranian-Jew, yes there are some..
2011?? What the ? the recession 'officially' ended in 2009, at least by it's customary definition...In August 2009 Roubini predicted that the global economy will begin recovering near the end of 2009, but the U.S. economy is likely to grow only about 1 percent annually during the next two years, which is less than the 3 percent normal "trend."[17] He notes that the Fed is "now embarked on a policy in which they are in effect directly monetizing about half of the budget deficit," but that as of now "monetization is not inflationary," as banks are holding much of the money themselves and not relending it. At some point, however, probably by 2011, he sees the recession ending..
China is killing itself with pollution, and its military, even today, is growing at 1/10th the rate of the U.S....
Still awaiting full explanations of the sunken S. Korean ship. If situations arose there both China and U.S. would be drawn in....
implications could be much more acute than currency disputes
tell that to all the unemployed people.
I think we should attack China.
What it do China!
We have UFC now in the States. Karate is obsolete.
Preemptive nuclear strike? We ain't got no spare army to do it.
What BTW would be your stated cause for war?
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