from the SA link: "The U.S. Fed killed the party when they raised interest rates. The Chinese are in the process of raising rates and raising reserve requirements; it's only a matter of when inflation scares the crap out of the PBOC and they overshoot. Right now they're still under the delusion that they can control the economy. They have been trying to slow growth for 4 straight years now, with no effect. Since the country can cover their tracks with bad CPI data (and GDP growth, and non-performing loans, and...) for awhile, they can prolong the inevitable. But the inevitable always comes. The longer the wait, the bigger the fall." I agree 100% with this comment. China is just starting to play with "free-markets" and their govt. thinks they can rig the game outright. The market always knows more then you, or in this case, the Chinese government. Yes, they produce lots of goods we consume, but they don't have some magic wand that allows them to do it on the cheap. They have a growing populous that wants more and more of what our society has everyday, from mortgages to credit cards to Pepsi. The past few decades has seen an arbitrage opportunity with regards to their labor costs. Ask any arbitrageur: the markets always correct the imbalance. A few more poison toothpaste scares or some more chemicals in pet food and we'll see companies in the US wake-up and realize that the lack of regulation in China - which is the reason for their low-cost of production - is going to impact their bottom-line when they lose consumers. I do not agree with regulation in the vein of Sarbanes-Oxley, et al. but I do in the vein of Underwriters Labratories.(UL) It will be a cold day in you-know-what when any regulation body in China is not State-controlled.
The same applies to the US. The Fed keeps playing God controlling the interest rate, to control inflation, to control unemployment... that leads to problems that force em to control housing, then consumer goods, and so on till they end up controlling every single aspect of the economy... they even try to control the economies of everyone else... the only thing that they don't realize is that they have no control over the economy, or the market... they might be able to fix a few numbers artificially... but that's just covering the sun with your hand... you can stop the river for a little while... but sooner or later it'll go over the barrier.
So let me get this straight. The Chinese are going to retaliate against our calls for strengthening their currency by strengthening their currency? Whatever.
Chinnesse fools... while they're still making threads... Bernarke is dumping USDs into the market... He's such a genius, he's gonna single handedly revaluate the yuan.
LOL; you guys missed the point; Chinese yuan is almost peg to USD; if USD drops; so does Yuan; So there is no solution for pressing Chinese government to appreciate yuan.
The yuan peg is not new news, but the magnitude of the imbalance would wreak havoc on their economy along with the rest of the world. They are pegging the currency for now, but I estimate China would be unable to maintain the peg if they dumped their USD reserves.