Appreciating the Yuan may not decrease unemployment in China. Employment is China's greatest political concern with 1.3 billion - possible unrest / destabilization. Appreciating the Yuan would increase the wealth of Yuan holders and help all exporters to China (U.S. / non-Chinese exports). It would also drive capital into China possibly causing future Chinese capital bubbles. Appreciating the Yuan would devalue China's $2.3 trillion of foreign-exchange reserves, including the holdings of U.S. Treasuries worth $798.9 billion, as of September 2009. China's policy is to keep their currency cheap increasing jobs at home - thereby raising the greatest number of Chinese out of poverty. The complaint by non-Chinese nations is that China is exporting unemployment.
The decade-long discussion about the RMB Yuan always ignores underlying changes in the Chinese and global economies. Since the recession struck, China has been very aggressively switching its economy away from copy-cat export-led growth to an innovation-driven economy also based much more on domestic consumption. This diversification is well underway. China's goal is to have its currency fully convertible. It will achieve this goal soon, as is shown by the convertibility now with Hong Kong. As this occurs, it will be in both China's and the world's best economic interests to let the Yuan find its own competitive level against the dollar, the Yen and the Euro. I see little risk of destabilization. These monetary authorities are not fools and they will engineer this to occur on a gradual basis.
I think the Chinese government. should let the Yuan float. The Chinese need to become less reliant on exports to drive their economy and increase their consumer spending. If this would happen, you would see the trade deficit balance out, and the Chinese would not have to such a large reserve of dollars. I think that in the next decade we will see a change in which the US will have... [continues]
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