<![CDATA[WSJ.com – World Bank Says China Needs Currency Appreciation:
The World Bank suggested it was in China’s own best interests to allow faster currency appreciation, ahead of a U.S. Treasury report that could label China a currency manipulator.
The bank’s careful statements follow blunt international pressure on China, including from the U.S. and the Group of Seven leading industrial nations, to allow a stronger yuan.
I’ve been saying for some time that part of the reason the Chinese have kept the yuan low, in addition to making its products more attractive, is a desire to use currency as a weapon. It makes sense for the yuan to appreciate, yet the Chinese have resisted in order to build up currency reserves, primarily dollar-denominated, that could be held over U.S. leaders’ heads—in essence, threatening to call the notes—in a crisis.
An appreciating yuan means China’s economy will run into a wall of reality as the real costs of its fantastic growth are finally expressed into the export market, which isn’t all bad for China. It will make workers in China more aware of how much more they may be entitled to, but it will also make U.S. shoppers feel their dependency on an artificially managed economy half-way around the world. Not a good time, for instance, to be Wal-Mart, which could see its margins under intense pressure. Also a bad time to be a shopper who, already confronted with higher gas prices, will not be able to count on Wal-Mart’s having artificially low prices, either. As always in the Bush era, it will be a bad, a worse, time to be poor.
Technorati Tags: China, competition, Economy, poverty
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