From James Galbraith.See below. A few wealthy Americans are speculating on Chinese real estate, an appreciation of the RMB is good for them. Their RMB gains will be worth a lot more in dollars. It's a cousin of the guess that I offered. Yet would Schumer and Clinton and Paulson sacrifice so much for just a few speculators? Globalization is turning upside down the old logic: competitive devaluation was supposedly impressed upon the state by popular demands! Now it may be pursued for the sake of speculators with interests abroad despite the risk it poses to most ordinary Americans. Yet it is presented as a populist or neo-mercantilist measure, strengthened by appeals to American Sinophobia (see the important book http://press.princeton.edu/titles/7895.html). And the Democrats are leading the charge?
James Galbraith writes at http://www.thenation.com/docprint.mhtml?i=20070305&s=galbraith
Would a big RMB revaluation solve America's China-trade "problem"? Well, it might hit China's exporters (and also, inevitably, its workers) hard. Multinationals might migrate to other low-wage countries; American importers might seek other sources of supply, in other corners of the Third World. But this much is sure: Not a single low-wage job would return to the United States. So, American consumers could be harmed, while American workers wouldn't be helped. One has to ask: What gives? Why is this an issue for the progressive agenda? Who really benefits from the pressure that our Treasury Secretary from Goldman Sachs, Henry Paulson, has been putting on Beijing? Well, speculators have flooded Chinese property markets in the past few years, contributing to a massive bubble in Shanghai and elsewhere. (China's trillion-dollar asset reserves come largely from sterilization of those investments--a central bank maneuver to insure that dollars do not circulate in China--and not just from its trade surplus.) If Paulson succeeds, they clearly would make out nicely. It may be that some of those speculators live in New York. That may explain Paulson's call--and Schumer's support--for an RMB revaluation. But it's not a reason for the rest of us to jump on board."