Chinese Yuan – 7.9982 = $1
For the first time ever, the Chinese yuan went under 8 yuan to the dollar. Though it was neglibile in its change – less than 1/10th of one percent….the psychological significance is great. The yuan moved into unchartered territory and everyone lived.
It’s kind of like waking up to being 40 and then 50….I don’t know about 60 yet. I thought it would hurt…but, I survived.
There are two schools – aren’t there always? Well, actually, I believe there are always at least three of everything….the right, the left and somewhere in between.
Some say that if the yuan appreciates, outsiders will stop scarfing up Chinese real estate and that will help reign in inflation. Also, gasoline and other commodities will become cheaper for the Chinese to buy.
But, export profits would be cut deeply. Big companies like Wal-Mart have resisted paying more to suppliers even as the yuan rises forciing the Chinese to become more efficient ….for good or for bad.
The yuan is likely to appreciate in value – one way or the other – over time.
Who do you think will benefit or hurt the most because of it?
RMB will continue appreciating over the next 5 years. For 2006, it will be around 4%. Sone has mentioned to Premier Hu that RMB should be appreciated at least 45%.
RMB appreciation will attract more and more overseas investors to underatake real estate investment in China because the government i Beijing will only aloow slight appreciation (single digit) each year.
There seem to be plusses and minuses in each direction.
A free market, though drastic by some standards, somehow has a way of working itself out over the long run.
Don’t you think?
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