DH writes:
>>The peg is precisely the point - those who think the yuan is
undervalued think the peg should be broken and the currency allowed
to float higher. The peg itself is seen by China-bashers as an
unseemly state intervention in natural market relationships.
The US is about the only country that China runs a significant trade surplus with. So claims about this being a systemic problem look overstated.>>
>From 1994 til 2004, China ran trade surpluses with Japan. Recently Japan
has about evened up the trade, running a proportionately small surplus
for 2004 and most likely 2005 (though a HUGE amount of trade, with China
becoming Japan's number one trade partner). However, it might be that the
reason Japan now has a most likely temporary surplus with China is due to
Japanese companies building the next wave of state-of-the art factories
that will just churn out more goods, exported to North America but also
to Japan and the rest of developed, consumerist Asia (Taiwan, Korea,
Singapore, Hong Kong).
Interestingly, China is a net agriculture exporter, and exports huge amounts of food and agricultural products to Japan and Taiwan.
Finally, the so-called dollar peg is really more a 'soft peg' or 'managed float'. Some of the rates do float in a narrow band, but not really enough to make it interesting for currency and short term investment speculators. In the next decade, China's strategy will be to widen the float and display 'management' that agrees more with the doctrine spewed at FEER or WSJ and the like. So long as the right people make money, they will stop their whining. For background see below (excerpts and links give).
Fugazy
http://www.japantimes.co.jp/cgi-bin/getarticle.pl5?nn20050127a3.htm
>>Exports to China came to 11.83 trillion yen and imports reached 10.37 trillion yen, giving Japan a 1.46 trillion yen customs-cleared trade surplus with China.>>
http://www.japantimes.co.jp/cgi-bin/getarticle.pl5?nb20040326a2.htm
The trade balance with China, an increasingly important trade partner, posted a surplus for the first time since March 1994. The surplus stood at 13.71 billion yen, while exports came in at 590.23 billion yen and imports at 576.53 billion yen, the ministry said.
http://biz.yahoo.com/ap/050125/japan_trade_2.html
>>TOKYO (AP) -- Japan's trade surplus expanded 1.8 percent in December amid booming exports, while China surpassed the United States as Japan's biggest trade partner in 2004, the government announced Wednesday.
ADVERTISEMENT
The merchandise trade surplus -- the measure of all goods exported minus those imported -- rose to 1.142 trillion yen ($10.97 billion), from the same month a year ago, the Finance Ministry said.>>
http://money.inq7.net/breakingnews/view_breakingnews.php?yyyy=2004&mon=04&dd=22&file=4
>>Japan's trade deficit with China shrank 19.5 percent to 2.05 trillion yen, as exports climbed 28.6 percent to 6.97 trillion yen while imports rose 13.3 percent to 9.01 trillion yen -- both record figures.
"China stands out (among Japan's trade partners) and it is natural that this trend will continue," said Tatsuya Torikoshi, senior economist at Daiwa Institute of Research.
However, export growth to China was "likely to be lower in the current year as we expect Chinese economic growth will slow to around eight percent" from over nine percent last year, he added. >>
http://www.japantimes.co.jp/cgi-bin/getarticle.pl5?nb20031003k1.htm
>>In 1994, China introduced what it calls a "managed float" system in its foreign exchange regime. During the Asian financial crisis of 1997, Beijing adopted a "no devaluation" policy for the yuan, effectively pegging the currency to the U.S. dollar in a narrow band around 8.28 yuan to $1.
Today, China faces growing pressure to float the yuan from its key trading partners, including Japan and the United States, which argue that Beijing uses the dollar peg to keep its currency weak and its exports competitive.
During the symposium, Yu emphasized that the dollar peg is not a formal government policy, adding that this point was stressed in recent statements by Chinese Premier Wen Jiabao.
Yu quoted Wen as saying in his Aug. 3 and Sept. 5 speeches that China's exchange rate regime is managed floating, not a peg to the U.S. dollar.
Yu Yongding (left) speaks at the Sept. 24 symposium at Keidanren Kaikan in Tokyo while co-panelists C.H. Kwan and Akira Kojima listen.
In the speeches, Premier Wen also said he would maintain a "basically stable renminbi exchange rate regime," according to Yu.
" 'Basically' is the important word. If the renminbi fluctuated by 1 percent or 2 percent, you would say it is basically stable. Maybe the band can be widened to 5 percent."
Yu noted that a "soft peg" to the dollar would be the only realistic approach for China, ruling out free float as still too dangerous an option for a "developing economy.">>
-- _______________________________________________ NEW! Lycos Dating Search. The only place to search multiple dating sites at once. http://datingsearch.lycos.com