IMF urges China to appreciate currency

[denem]

Source: Radio Australia

The head of the International Monetary Fund says it is important for China's currency to appreciate to achieve a more balance economy.

The IMF managing director, Dominique Strauss-Kahn, is visiting Beijing, which has been coming under growing international pressure to let it rise because it artificially reduces the prices of its exports.

China's central bank said last week it would consider major currencies in guiding its currency, but a senior minister has played down expectations of a policy shift.

It says it needs a low currency to help many more millions of people to trade their way out of poverty.


Read more: http://www.radioaustralianews.net.au/stories/200911/2744767.htm?desktop

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China can say what it likes. The problem is:

$27.8 US trillion dollars held in US Treasuries.

Sure it could float the Yuan, up around 20%, take a $5 to $6 US trillion loss on the chin, but then what?. Without a currency fixed to the Dollar, they will be looking elsewhere.

We concentrate on US consumption, and Chinese dumping. The flip side is Chinese saving. How about a $5 trillion dollar loss: front, center and everywhere? They're not that stupid.

[amandabeech]

1. Perhaps China could start an old age and disability pension system.

Their citizens might save less and buy more Chinese-made products themselves if they thought that they had a safety net in retirement. Then the Chinese economy would be more supported by internal demand and would have less need to subsidize its imports.

Don't forget, China buys a huge amount of raw materials internationally, including a huge amount from Australia.

They are paying far too much for oil, coal, steel and food.

How much would they save if they paid for those basics with a fully valued currency. At least they wouldn't have to subsidize prices for their citizens.

Remember, it isn't just the U.S. that is being hurt, it is every other country that buys from China. The EU may be China's biggest market now. The Europeans may end up with some of the same problems as we have had with production largely moving abroad and leaving them with fewer jobs, particularly in the eastern EU where labor is relatively cheap.

[ChangoLoa]

3. If they reevaluate, they'll end up exporting less products and having less $ to buy raw mat. imports...

[amandabeech]

4. True, but their economic system would be sustainable and more honest. n/t

[denem]

5. Thats good for their consumers. Their savers will take a big loss.

And they won't want to save in Treasuries again. It's a Faustian bargain.

[denem]

6. China wont' buy more US Treuries if they have to take a 15 - 30% loss.

They bought them as ultra safe. That wouldn't be so much of a problem without a mega US Debt. The US economy is conditioned to cheap Chinese imports, and cheap Chinese savings. Paradoxically, the first is easier to remedy than the second.

[damntexdem]

2. Hey, I really appreciate currency!

I mean, if China isn't willing, the IMF should send it to me. ;-)