China Will Let Yuan Weaken If Exports Fall Sharply, Asahi Says

July 21 (Bloomberg) -- Chinese central bank adviser Zhou Qiren said that the nation will let the yuan weaken if exports fall sharply, according to a report in a Japanese newspaper.
The currency’s renewed flexibility means declines are possible, the Asahi newspaper quoted Zhou as saying in an interview published on its website in English today and Japanese yesterday. Zhou couldn’t be contacted through his office in Beijing to confirm the comments.
Any sustained weakening of the yuan could set China on a collision course with trading partners, who say the nation’s exports are bolstered by an undervalued currency. U.S. President Barack Obama said he expected the yuan to rise “significantly” after a two-year peg to the dollar ended June 19.
The fixed exchange rate should have ended earlier because central bank sales of yuan to maintain it resulted in an excessive amount of money entering China’s financial system, Zhou said, according to the Asahi. He added that the economy had overheated, the newspaper reported.
Yuan forwards dropped today to the weakest level this month on concern a slowing economy and a clouded outlook for exports will prompt the central bank to limit gains. Twelve-month non- deliverable forwards declined 0.1 percent to 6.6870 per dollar as of 12:35 p.m. in Hong Kong, reflecting bets the currency will strengthen 1.4 percent from the spot rate of 6.7783.
The yuan has advanced 0.7 percent since the peg ended.
Zhou is an academic member of the central bank’s monetary policy committee. His appointment was announced in March.

don't think it's likely to happen tbh.. too much pressure from the US, and China's still heavily dependent on the US for its exports

Except the US has no real power to do anything. Sure slap on some tariffs, China will hit right back. Keep in mind who's bought all those treasuries, China holds so much US debt it's just not funny.

The US won't allow China to depreciate yuan.
However, China just won't follow US instructions to largely appreciate yuan either.

Doubt very much the RMB will weaken but it will not be strengthening any further. The Chinese have appreciated the RMB recently by as much as 1.5% during the G20 summit and now it's only back to 1.2%. Think it will just stabilize here.

[ Last edited by  geoduck at 22-7-2010 13:57 ]

I have no idea why some people think the US really has any say in this matter.

While I don't think China will let the yuan de-value, I also don't think has any power over this matter. Sure China doesn't want to isolate itself by being villified abroad. But if it was strictly only the US that had an issue, I don't think they'd give a damn, China has US by the balls so to speak IMO.

Because China currently holds more than 2 trillion USD in US bonds.

I dont think the chinese administration is that dumb to appreciate their Yuan drastically.

What incentive do they have? If they appreciate the RMB, they lose out on the bonds return.

US is helpless though, b'cos they are still in the recession and recent unemployment rate still does not look good.



Having said that, the recent RMB does appreciate from 88.3 (less than 12 mths agao) to 86.6 per HKD100, today.

It's currently standing at RMB 87.1 (black market) to HKD100 as of noon today. Think this is the new benchmark level where it will stay for some time. Thus, the RMB has only appreciated 1.3% in real terms.

BTW, Hunter, this is an unusually serious post from you. Didn't know you had such great analytical abilities.

[ Last edited by  geoduck at 22-7-2010 15:16 ]

When china made their announcement before the g-7 did they say te rate would floatthe title of the article makes clear that it is controlled

All China had said at the time is that they will increase the daily trading band of the yuan which basically does not guarantee anything but it did avert China bashing on the yuan druing the conference.

Agreed with above poster, they move was to limit to amount of discussion of the yuan during the G8/G20 summit in Toronto, much like alot of political policies from any country, ex. Kyoto Protocol, the promise is always delivered first, the actions take their time over dozens of years  

It also appears that by planting this seed now if the economy does not improve the central bank has room to maneuver.  With bernanke's comments yesterday the US recovery is hitting headwinds.  But it changes daily, ad the stock market is up big today.

As striking workers win higher wages from their employers, prosperity is spreading to the working class.  Which in turn brings a stronger spending class which create a larger consumers.  I have heard that China has greatly increased in demand for energy and other good such as foreign made cars, and tv's.  As so, these workers with a strong yuan can easily now make such purchases.

Yeah I think we're agreeing here that the US can't do squat. They can force China's hand into doing what they "the US" wants.

I dont have a Degree in Bareback Management from University of Clean Pussy but I do have a Master in Financial Instruments.

China's trade surplus balloons
ALLISON JACKSON
August 10, 2010 - 3:59PM
               
China's trade surplus ballooned to 28.7 billion US dollars in July as exports hit a record high, government data showed Tuesday, which is likely to intensify pressure on Beijing for a stronger yuan.
Despite a slower growth in exports, the nation posted its biggest trade surplus since January 2009 as the value of China's overseas shipments reached a monthly record 145.52 billion US dollars in July, customs authorities said.
The data suggested China had so far seen little impact from the European debt crisis and weak recovery in the United States, as consumers continued to snap up Chinese-made televisions, T-shirts and leather shoes.
July's trade surplus compared with a surplus of 20.02 billion US dollars in June and surpassed analyst expectations for 19.6 billion US dollars.
It also marked a sharp turnaround from March, when the country recorded a trade deficit.
Exports grew 38.1 percent from the same period a year ago, slower than in June, when they were up 43.9 percent as steelmakers and other raw material producers accelerated shipments before the government scrapped tax rebates on some products last month.
Policymakers were likely to resist any outside pressure to let the Chinese currency appreciate too quickly against the dollar, using the slowdown in export growth as their justification, experts said.
Imports gained 22.7 percent year-on-year to 116.79 billion US dollars in July, marking a sharp slowdown in the pace of growth from June, when imports rose 34.1 percent.
It was the fourth straight month that year-on-year growth in imports has slowed.
"In the United States we still have unemployment close to 10 percent and data out later this week will likely show another huge trade deficit of more than 40 billion US dollars," said Brian Jackson, a senior analyst at Royal Bank of Canada in Hong Kong.
"This contrast in the trade position of the two most important economies in the world will likely increase the pressure from Washington for Beijing to allow further currency appreciation."
Beijing pledged in mid-June to let the yuan exchange rate trade more freely against the dollar, though it ruled out sharp fluctuations in the value of the currency.
Since then, the yuan has gained less than one percent against the greenback, angering US lawmakers and other critics who claim the currency is undervalued by as much as 40 percent, giving Chinese exporters an unfair advantage.
But the slowdown in export growth could deter Beijing from letting the yuan appreciate too fast, analysts said.
"The seasonal rise in the trade surplus during the remainder of the year, and expected slowing in year-ago export growth is unhelpful for foreign exchange policy," said Ben Simpfendorfer, economist at Royal Bank of Scotland in Hong Kong.
"The two developments will only add to Washington's insistence on a stronger yuan and Beijing's resistance."
© 2010 AFP
This story is sourced direct from an overseas news agency as an additional service to readers. Spelling follows North American usage, along with foreign currency and measurement units.
Link here:
http://news.smh.com.au/breaking- ... 20100810-11xfx.html

Who os buying all these Chinese goods when the recession is in place and people are cutting back.  Is the US the biggest buyer

in long terms, yuan will keep strengthening.

shit, does that mean punting is gonna get more expensive for all of us? damn the day when china becomes as rich as hk and girls stop offering themselves as wgs

The yuan has become cheaper in US dollar terms.  For Nationals the currency buys less abroad