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December 20, 2006
Renminbi Redux: Have They Begun to Circle the Wagons?
UPDATE to this post: More silliness from Washington. [One is sorely tempted to employ the perjorative "stupidity," given the continued emphasis upon ineffective strategies.] The Chinese government will give scant attention to strident but empty-fisted pronouncements.
Token offers of appeasement, like the single digit percent movement of the value of the RMB, effected over years -- we have heard similar promises about revaluation since the early 1990s -- should be taken as mere off-putting tactics which many in the American business community have come to understand for what they really are.
Why should China move when there is little genuine pressure upon their position? American investment money flows into China like the proverbial honey. Americans purchase ever increasing quantities of China-made products, even as their own manufacturing base has suffered terribly.
Change in yuan policy will come only when export revenue diminishes and inbound investment falls. Chinese understand that American pols are, frankly, impotent -- none will attempt to curtail U.S. domestic consumption of Chinese product or the massive capital outflows from the U.S. into China that do more to strengthen the Chinese position than anything the Chinese could do themselves.
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