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Timing is everything. They're not quite there yet. Once China allows their currency to appreciate (they've already hinted at next year) their middle class will rise exponentially and will have the necessary and growing buying power to fuel the consumption they need to match their production. The dollar is already being replaced with gold and China has made big trade agreements all over the world with emerging markets to trade in other currencies. This is chess not checkers.
I agree with you, but part of the chess match is with themselves. A rising middle class will always want more and never want to go back. You can't have exponential growth in a non-free market society as central governments are efficient enough to create that growth. They are playing a game of wanting to maintain control, or give it up slowly, while trying to balance the need to create growth to keep a rising population employed.
We will probably see a change in our lifetime, maybe as symbolic of the fall of the Berlin wall where the Chinese government will no longer be able to control the country as they have up to this point. It's not going to happen overnight but clearly change is currently happening. The unanswered questions are how dramatic are the changes going to be and over what period of time.
If China is concerned with "basic stability in the exchange rate" then stop pegging the Renminbi to the dollar and let it trade freely.
ReplyDeleteTiming is everything. They're not quite there yet. Once China allows their currency to appreciate (they've already hinted at next year) their middle class will rise exponentially and will have the necessary and growing buying power to fuel the consumption they need to match their production. The dollar is already being replaced with gold and China has made big trade agreements all over the world with emerging markets to trade in other currencies. This is chess not checkers.
ReplyDeleteI agree with you, but part of the chess match is with themselves. A rising middle class will always want more and never want to go back. You can't have exponential growth in a non-free market society as central governments are efficient enough to create that growth. They are playing a game of wanting to maintain control, or give it up slowly, while trying to balance the need to create growth to keep a rising population employed.
ReplyDeleteWe will probably see a change in our lifetime, maybe as symbolic of the fall of the Berlin wall where the Chinese government will no longer be able to control the country as they have up to this point. It's not going to happen overnight but clearly change is currently happening. The unanswered questions are how dramatic are the changes going to be and over what period of time.