Something’s Brewing in China

Goldman’s chief economist, Jim O’Neill, thinks China is about to revalue its currency by as much as 5%. This would be a huge deal.
For the second time, China has ordered its banks to increase their reserves. The country is desperately trying to contain bank lending which is skyrocketing. Consider that in January alone, banks used up nearly one-fifth of this year’s lending target.
For the last 18 months, China has firmly kept the yuan in place, but the cracks are starting to show. Their export market is booming and assets continue to inflate. Most importantly, the rest of the world isn’t happy with Beijing.
If China did revalue the yuan, it would help cool off their economy, and it would help our economy which is something we desperately need.
Why have the Chinese been so stringent? Let’s say you’re a communist official in Beijing. Which choice would you rather face? A) Millions of unemployed young men in your central cities. B) Anything that’s not A.
Now you get the idea. The migration of people from rural China to their major cities isn’t merely big, it’s the largest migration in human history. Think of Tom Joad, now multiply that by 100.

Posted by on February 15th, 2010 at 11:09 am


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