[lbo-talk] yuan dollar

[Marvin Gandall]

Rakesh: >> ...US Treasury wants a faster appreciation of yuan  vis a vis the
>> dollar...an appreciation of the yuan vis a vis the dollar would raise the
>> dollar value of
>> the yuan US corporations are holding, no? US corporations seem ever
>> dependent on profits made abroad.
>
Doug: > What yuan balances do U.S. corps have? They have to pay local costs
> in yuan, how do they accumulate the currency? How big are their
> reserves?
>
> My impression is that the Treasury is responding to Congressional
> pressure, which is coming from smaller biz and worker electoral ire
> over China.
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The US imports five times as much from China as it exports to it - the 
bilateral trade deficit last year was more than 230 billion dollars- so 
there is an immense benefit to US consumers and to US corporations in 
keeping the yuan weak relative to the purchasing power of the dollar. 
Walmart alone imports close to 20 billion of goods annually from its Chinese 
suppliers, and pays its Chinese employees in yuan.

If the yuan were to appreciate against the dollar, it would shrink the trade 
deficit, but at a huge cost to American consumers and businesses dependent 
on Chinese goods. Their number far exceeds the number of businesses selling 
into China who would benefit from a stronger yuan. Until that political 
calculus changes - which is not remotely on the horizon - a "tough line" 
with China will remain more rhetoric than reality, and China will revalue at 
its own pace and in accordance with its own domestic needs.