On Fri, Jan 2, 2009 at 10:50 AM, Charlie <[email protected]> wrote: > Several analysts noted that while governments have resisted pressure for > protectionist policies, there are fears they might take the short cut of > devaluation. Thailand and Taiwan have recently become net purchasers of > dollars, provoking the Asian Development Bank to warn against "unnecessary > and excessive interventions in the currency markets, especially to > depreciate domestic currencies".
This is a very important essay. Other commentators have also noted disturbing recent signs that China is about to embark on a "beggar-thy-neighbor" mercantilist policy to try and export its way out of trouble. The likely victims of such a policy are the poorer export-dependent nations of South-east Asia. http://www.atimes.com/atimes/China_Business/JL09Cb01.html --------------------------------------snip > As for the beggar thy neighbor, it has become clear over the past week that > Chinese government officials intend to export their way out of the global > economic crisis. This is all too readily apparent in the recent downward > movements of the Chinese yuan relative to the dollar. Stripped of any > rhetoric, this movement represents a "competitive devaluation" designed to > boost Chinese exports to the US at the expense of both domestic US > manufacturers and competing countries such as South Korea and Japan. > > In fact, Chinese currency manipulation represents "beggar thy neighbor" on > a grand scale. By grossly undervaluing the Chinese yuan relative to the US > dollar over the past five years, China has grown its economy on the backs of > American workers and helped to decimate the American manufacturing base. > Today, it is almost impossible for American manufacturers to compete against > their Chinese counterparts when the yuan is undervalued by 30% or more. Add > to this an extensive array of illegal Chinese export subsidies, and it > becomes easy to understand how China has been able to offshore so many > American jobs to its own factories. > Under political pressure, China allowed the yuan to modestly appreciate > relative to the dollar over the past year. However, despite this > appreciation, the yuan still fell relative to the euro and other major > currencies - in the process, significantly exacerbating China's trade > imbalance with Europe. > -raghu. -- "My campaign is a disaster, Moe. I hate the public so much. If only they'd elect me, I'd make them pay." - from the Simpsons
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