Yuan surges 0.3% - is this a real change in Chinese currency policy?
Babu Ghanta
Oct. 29, 2007

China's central bank signaled it would tolerate faster appreciation to help narrow a record trade surplus. The G7 handed China a virtual ultimatum and China obliged quietly. But a 0.3% rise in Yuan against US Dollar in a single day would not make much difference. A consistent rise is required that will reverse some of the flow of goods and services into China.

Again EU and US is wrong on China. Chinese and Indian philosophy is to sell and get foreign exchange. The EU and US believe in an open trade environment, they will sell in China and India and turn the table on Asia. At the same time, China and India believe that the US and EU are naïve and will fall into the Asian trap where the western companies fail to penetrate the Indian and Chinese economies.

The G-7 countries called for ``an accelerated appreciation'''' in the Yuan in a communiqué following an Oct. 19 meeting in Washington. Chinese officials have this time openly recommended higher Yuan against the US Dollar.

But fact of the matter is that for a long period of time Chinese controlled central economy has failed. Their Government owned enterprises are failing very rapidly. Close to 25 million Chinese workers who get laid off yearly by Government owned enterprise must find employment in outsourcing sectors.

If that is the case China will never voluntarily bring the currency to the target level. The flow of jobs from US and EU keep China alive.

Yuan surges 0.3% - is this a real change in Chinese currency policy?
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But a 0.3% rise in Yuan against US Dollar in a single day would not make much difference. A consistent rise is required that will reverse some of the flow of goods and services into China.
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