How China is Sneakily Keeping Its Competitive Advantage

"K2T Wisata"

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Eight, 10, 12% growth is not enough for China.

The Middle Kingdom is pulling out all the stops to keep the economy energized. It will grow at ONLY 9% this year.

China has a Y57 trillion (that’s a “t”) ($900+B) plan for a spending package and has lowered interest rates four times since September.  Still, Beijing is sneakily (?) doing more.

In 2005, China changed from a fixed exchange rate for its currency to allow its currency to move. It since lost nearly 20% in value. It was a bit over Y8=$1, and is now Y6.8817 = $1.

The People’s Bank of China has generally guided the change by limiting the maximum amount of fluctuation that can take place in one day.

With the world economy doing the slow dance, China’s exports have taken a beating. So….for the past four days, China has allowed the yuan to depreciate against the dollar by the maximum allowable limit. What happens then is China’s exports become more competitive, eh? Sneaky, sneaky. And, likely to keep on going till China is able to keep its economy chugging along above 10% while the rest of the world’s economy stops or goes backward.

So, who’s going to tell China to stop?