peter236

The Chinese needs to gradually allow the RMB to become a reserve currency, so that it will go up in value. Some experts predict the RMB will go up 200-300% in the future.

peter236

Grandfather is caught between a rock and a hard place when it comes to the valuation of the RMB.

On ...
Lik 發表於 2011-4-19 22:21

hahaha, that is why you don't understand finances. If the RMB goes up in value, what will happen? Chances are most currencies in other developing countries will also go up big.

You need to understand that if China, the big guy on the block, starts dumping $US or at least stop buying as much $US, all the other smaller guys will panic and follow suit.
As a result the $US will crumble much quicker against most currencies.

Will Chinese factories lose their competitiveness? Not when most other developing countries' currencies also go up at the same time.

But the Chinese products are moving up the value chain rapidly, so that they no longer compete based on low prices.
In addition, the Chinese are rapidly developing their own local consumption market so that they no longer depend as much on exports.

As there are no other viable alternative for $US assets (Japan bond or Euro bond are even worse investments) in the short term, what China will continue doing is to use their $US to secure their supply of oil and natural resources.

The Chinese strategy of gradually allowing the RMB to go up and becoming a reserve currency is just brilliant.

peter236

If your genius ideas would really work, RMB would have appreciated much more rapidly a long time ago ...
Lik 發表於 2011-4-20 00:15

hahaha, there is few people expecting the $US to crumble big right away, but we should expect the RMB to go up about 5% per year against the $US. The other developing countries currencies will also go up. Chinese factories will not lose their competitiveness.

$US as a percentage of Chinese total foreign reserves has been going down steadily,

peter236

回復  rockypath

I think you may have misunderstood what I meant:

e.g. GDP annual growth set at 10 ...
lo_pak 發表於 2011-4-20 09:56

There is something wrong about your calculations.
The 10% growth rate already excludes inflation.

Including inflation of about 4.5% per year, China's GDP grows at about 15% per year.

Including 4-5% RMB appreciation, China's GDP expands by about 19% per year in $US terms.
At this rate of expansion, the Chinese economy will be same size as the US economy in 8-10 years. That will be fun to watch.

peter236

yeah, China is moving up the value chain very quickly.