Grandfather is caught between a rock and a hard place when it comes to the valuation of the RMB.
On one hand, export and manufacturing businesses (esp those in SE China) risks losing their shirts each time the RMB's value goes up. Quotations are often billed in USD, and the factories have to honour their quoted prices for a period of time. Each time the RMB goes up in value, it eats into their already razor thin profit margins. As the RMB continue to face upward pressure, these factories may end up losing money on their contracts. Increasingly, factories are moving towards shorter quotation periods, or they try to quote their prices in RMB instead of USD to prevent losses due to the exchange rate. Still, as RMB goes up, businesses may choose to source their products from elsewhere instead of purchasing from China. For certain low-skilled manufactured goods, Chinese-made products are no longer enjoying the price advantage they once had. Corporations are buying from other countries in S.America, and SE Asia instead.
On the other hand, the RMB continues to face upward pressure because it really is undervalued. Countries are slapping tariffs on ultra-low priced Chinese goods and taking matters to WTO to sue the Chinese government for value manipulation. Instead of having tariffs levied on Chinese-made products, it is at least somewhat smarter for China to have the RMB appreciate instead. That way, at least the Chinese citizens can capitalize on the stronger RMB's purchasing power instead of having that money channeled to other countries as tariffs and levies. But then when the RMB appreciates, things go back to paragraphy #1 and end up hurting the export sector.
I certainly do not envy Grandfather's financial planners and policy makers.
-Lik |
發表於 2011-4-19 22:21
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