> Asia Needs Deal to Prevent Panic Selling of U.S. Debt, Yu Says
> Bloomberg. com
> By Kevin Hamlin
> September 25 2008
>
> ``Our export-growth strategy has run its natural course,'' he said. ``We
> should change course.''
>
> China should stop intervening in the foreign currency markets and thus
> allow rapid appreciation of the yuan, he said. While this would cause pain
> for exporters, China could ease the transition by using its strong fiscal
> position to aid those who lose their jobs. It also should stimulate
> domestic demand to offset lower income from overseas sales.
Yes, this policy shift can be traced back to 2006, when China's developmental state started to throw resources at its high-tech sectors, roll out its broadband network (China has an amazing online game culture), and jump-start its eco-industries. But they've been getting serious about the shift more recently - e.g. today, China is one of the world's largest producers of wind turbines.
This does three good things: (1) prevents the US economy from going off a cliff, (2) takes the heat off the countries of the periphery, who are finding it tough to compete with China's low-end exports, and (3) boosts long-term demand for medium-tech goods from Latin America and Eurasia. Basically, China is going to become a major aource of final demand in a very short amount of time.
-- DRR