Comments on: How China is Sneakily Keeping Its Competitive Advantage in this World Recession

By: Exchange Rates?

Exchange Rates? — Mon, 09 Nov 2009 05:14:50 +0000

“In 2005, China changed from a fixed exchange rate for its currency to allow its currency to move. It since lost nearly 20% in value. It was a bit over Y8=$1, and is now Y6.8817 = $1.”

Ok.. about exchange rates, by saying “it” lost 20% in value you are talking about China’s currency right? Actually China’s currency has appreciated about 20% in that example. The USD is the one that has lost 20% of it’s value (or purchasing power) relative to the RMB.

As per your data, before it cost Chinese people 8+ RMB for $1 USD, now it costs them LESS money (only 6.8 RMB) for $1 USD. That means the ratio went down, but the RMB appreciated compared to the dollar. It costs them 20% less for American dollars, which means it costs them less for American goods (hence appreciation of their currency). Likewise, it costs Americans 20% more for Chinese goods or Chinese services (aka depreciation of the USD in relation to the RMB.)

Your ending is very valid and has a great point, if you don’t have the numbers backwards again. You didn’t include the numbers though so.. I just hope the RMB actually depreciated or lost value compared to the USD in the opposite way as it did in your above example where you said it lost value but were wrong.

By: aj

aj — Fri, 05 Dec 2008 20:47:02 +0000

yellow type against grey background is totally illegible!
why don’t you change the color to black type?

By: Guy Bloke

Guy Bloke — Fri, 05 Dec 2008 12:58:07 +0000

Sneaky? This is standard operating procedure for any country (including Canada when its dollar soared against the USD).

Nothing sneaky here: it’s the name of the game. The US is to blame too, by propping the USD up artificially, they are making it easier to buy imports (consume), but making it that much harder to export (produce).

By: Yeah, I'm a Texan

Yeah, I'm a Texan — Fri, 05 Dec 2008 07:35:34 +0000

Why should they stop? Seems like they have a sound strategy.

By: JMD

JMD — Fri, 05 Dec 2008 07:14:16 +0000

Right, but for China 8% economic growth would be as devastating as a recession is to the U.S. and Japan.

You can’t just go from 11% economic growth to 0% and be ok. The entire economic system would be destroyed.

While I don’t agree with their methods of currency control, you can’t condemn the country for trying to avoid a large drop in its growth rate.

By: Jack Indigo

Jack Indigo — Fri, 05 Dec 2008 06:51:29 +0000

Who’s to stop China? They will stop themselves when they lower that value down so much. It’s a race to the bottom. And this isn’t the only country trying to devalue their currency to save themselves — the world is doing that now. It’s a race to the bottom, just like the Great Depression.