Thread: China ready for currency war

China ready for currency war, central bank official says
March 2, 2013

Beijing - A top central banking official announced that China is "fully prepared for a looming currency war," state media reported on Saturday.

The conflict could be avoided if major countries observe the consensus reached at a recent G20 meeting to focus monetary policy primarily on the domestic economy, Yi Gang, deputy governor of the People’s Bank of China, was quoted as saying by Xinhua news agency.

G20 members "had shown no signs of scaling back monetary easing that has injected a flood of cash into global markets," the report said, highlighting a 2o-per-cent devaluation of the yen against the US dollar under Japanese Prime Minister Shinzo Abe.

"China is fully prepared," Yi told Xinhua. "In terms of both monetary policies and other mechanism arrangements, China will take into full account the quantitative easing policies implemented by central banks of foreign countries."

Chinese manufacturing grew at its weakest rate in five months in February according to data released by the National Bureau of Statistics and the China Federation of Logistics and Purchasing on Friday.

The Purchasing Managers’ Index in the manufacturing sector fell to 50.10 in February from 50.40 the previous month, indicating recovery had slumped to its slowest rate since September.

nationmultimedia.com

You give them an inch, they'll take a yard.

They're trying to get China to raise the value of their currency to a real-value level. They tried to get them to do it about 10 years ago, but China refused, and that's when the global currency war really began.

Originally Posted by BugginOut

They're trying to get China to raise the value of their currency to a real-value level. They tried to get them to do it about 10 years ago, but China refused, and that's when the global currency war really began.

"Real-value" level?

There is no such beast. Real worth.
Amongst any currencies or economies.

It's all quite hocus-pocus.

^ it's quite obvious yet again that you don't know what the fuck you are talking about.

The world must force China to float their currency to International Standards. They have played the cheap money game far too long. Simply close the US Market to Xian goods and China will be forced to comply. As to the USA going bust ... it already is bust. The Chinese need the USA more than the USA needs China. Yes Wa Mart will scream ... but they have been screwing North America since the day they opened. The World Financial Markets will bitch and threaten, but they have little credibility anywhere these days, after the recent US financial debacle.

Originally Posted by BugginOut

They're trying to get China to raise the value of their currency to a real-value level. They tried to get them to do it about 10 years ago, but China refused, and that's when the global currency war really began.

what is the 'real-value level'?

Why does the U.S. need China?


CHINA





November 10, 2010|By Li Daokui, Special to CNN

• 

The United States needs China for two simple reasons: China can make a difference in the world after the financial crisis, and more importantly China's fundamental interests are aligned with the United States.
It is obvious that China can make a difference in the world today and tomorrow. China is the world's leading exporter of manufactured goods. A sudden appreciation of its currency would inevitably export inflation to the rest of the world, which is not welcome by American families struggling to find jobs. China holds the world's largest currency reserves, enough to buy up the share prices in New York or sell down the yield curve of the T-bond.

Why Does China Buy U.S. Debt?

By Anton Busch, eHow Contributor , last updated October 23, 2012

• Print this article

As the market economy and worldwide influence of China grows, so too does the nation's significance to the U.S. economy. China's manufacturing industry is highly productive, exporting goods to many Western markets, including the U.S. But the U.S. reliance on China is actually twofold; not only are we one of the biggest consumers of Chinese goods, but China is also one of our biggest creditors.
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1. History
   • According to publications such as "The Financial Times" and "The Economist," China has always been one of the largest economies in the world. The People's Republic of China (PRC, or Mainland China) is the third-largest economy in the world, behind Japan and the U.S., as of 2008. Much of China's economic might lies within its industrial and manufacturing sectors, which account for nearly half of the nation's gross domestic product (GDP). China's factories are advantageous to U.S. businesses because they provide far cheaper labor than for goods that are manufactured domestically. As such, many distributors in the U.S. buy Chinese-manufactured goods or Chinese-brand goods.
   Identification
   
   
   • Public debt is incurred in the U.S. when individuals buy government bonds. A government bond is essentially a loan to the U.S. government. These are advantageous to the bond holder because the value increases according to interest rates, resulting in a profit when the bonds are redeemed. Meanwhile, the government has increased spending power (i.e., leverage). For the most part, the U.S. debt is owed to its own citizens. However, as U.S. expenses grow, the government increasingly turns to other nations to raise capital. This results in external debt.
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   Function
   
   
   • In the case of China, one of the greatest contributors to the U.S. indebtedness to China is the fact that the U.S. purchases far more goods from China than China purchases from the U.S. Demand in the U.S. for Chinese goods outweighs demand for U.S. goods in China by nearly 500 percent, according to the "Washington Post." With fewer goods to return in kind and a falling dollar, the U.S. has, in essence, been buying Chinese goods on credit. Also contributing to the amount of U.S. debt that China holds is the amount of money that the U.S. borrows from China to raise capital for other government spending.
     Historically, buying U.S. government bonds has been a safe investment, since the risks of the U.S. defaulting on the loan have been very low, while the chances of the dollar increasing in value have been high. As the U.S. hits rough patches in its economy--such as the subprime mortgage crisis--and needs to raise money in an attempt to steady the turbulent market (the massive bailout of investment banks and financial services companies, for example), it can turn to other nations for extra spending power. This stimulates the consumer economy, because loans and mortgages underwritten by foreign investors result in lower interest rates and more flexible credit terms.
   Significance
   
   
   • According to the "Washington Post," China became the largest foreign creditor to the U.S. in November 2008. Because of this, China has great influence over the American economy. Should China choose to stop buying U.S. debt, it would cease one of the largest in-flows of capital into the country, making it harder for businesses to obtain loans and raising interest rates and commodity prices for consumers. If China were to begin selling U.S. debt--essentially cashing in its government bonds--it would actually remove money from the U.S. economy, creating an even more dire situation.
     Another issue is the disparity between the currencies. In the global economy, the dollar has much more buying power than the yuan (China's denomination). This makes U.S. goods more expensive to export to foreign nations than Chinese goods. As such, China's prices for manufactured goods are far more competitive than those of the U.S.
   Considerations
   
   
   • The U.S. has a somewhat checkered history with China. The U.S. was at odds with China during its communist rule. This tension nearly culminated in all-out war during the Clinton administration, when the U.S. vowed to defend democratic Taiwan. Relations between the U.S. and China have since cooled, fostering in a new era of economic alliance. Now, although our economy and our lifestyle greatly benefits from the cheap labor in China, the human rights policies and environmental issues clash with the U.S. standards. The government in China is somewhat of an anomaly; although China has a market economy, freely trading with foreign nations such as the U.S., there are many restrictions on free speech, immigration, religion and freedom of assembly.
     The danger in the U.S. coming into a dispute with China is the massive financial clout China has over the states. As a source of much of the spending power of the U.S. government, as well as affordable goods for consumers, the severing or exploitation of these economic ties could wreak havoc on the U.S. economy--freezing credit, removing capital from the system, sending prices skyrocketing, bankrupting businesses and eliminating jobs--essentially causing the U.S. to fall into a depression. Because of this, dealings with China are more delicate and critical than ever.