The Chinese might not have the freedom to get involved in politics. But the ruling communist party has given its subjects one freedom while opening the economy to the world since 1979, and especially since China joined the WTO in 2000 – that’s the freedom to consume.
The stories about the booming Chinese consumer market strike a discordant note on one level. After all, the dominant global political debate about the Chinese economy is about how the country is a chronic under-consumer. Continue reading »
You say appreciation. I say flexibility.
Last weekend’s widely-praised announcement by China’s central bank that it would no longer peg the renminbi to the US dollar is already attracting a backlash. Paul Krugman, a longtime critic of China’s currency policy, labelled the change “the renminbi runaround.”
Krugman has a point – the clearest evidence of the Rmb’s undervaluation is Beijing’s $2,400bn pile of foreign reserves, the product of systematic intervention in foreign exchange markets over the past decade. Continue reading »
China’s decision to break its currency peg with the US dollar – a peg reinstated in July 2008 as the global financial system began to unravel – has won Beijing predictable plaudits for its PR savvy.
China’s announcement defused the issue ahead of next weekend’s G-20 summit in Toronto. For all the fury coming out of a Congress underwhelmed about the move – Beijing did not shift its currency at all; it just simply agreed to make it more flexible – it is difficult to see the renminbi now becoming central to the US mid-term elections in November. The Obama administration has many bigger fish to fry with Beijing than to haggle endlessly over the Chinese currency. Continue reading »
All the planets are aligned for China to make its long-awaited move on its currency, at least on one view of events. After a few months of small trade surpluses and even one monthly deficit, May’s trade figures recorded a healthy rebound in exports. China’s May trade was in the black to the tune of $19.5bn, with exports rising 48.5 per cent year-on-year.
The figure is closely watched in Chinese policy circles. Exports don’t drive economic growth as much as many US Congressmen would have you believe. But trade is hugely important for creating jobs, which is the key to broader social stability. The Commerce Ministry, which has always battled moves to allow the currency to appreciate, will have its arguments weakened by the export sector’s return to rude health. Continue reading »
The public comments by Wen Jiabao, China’s Premier, on the country’s recent outbreak of labour unrest is significant, if for no other reason than the fact they were made and publicised at all. Wen’s decision to speak out on the issue is a sure sign that the labour unrest is a matter of deep concern at the highest levels of the communist party leadership. Continue reading »
Are Chinese labour markets, and by extension, the manufacturing model that has helped build the country into an economic superpower, on the verge of a fundamental change?
The high-profile outbreak of industrial unrest in recent weeks in the south, the so-called workshop of the world, and a spate of worker protests this week in the Yangtze river delta near Shanghai, has raised a host of questions about the sustainability of China’s model.
The event which garnered the greatest notice was the series of tragic worker suicides at Foxconn, the Taiwanese owned contract manufacturer which makes products for Apple and HP and the like. Continue reading »
What would happen if Beijing property prices fell by 40 per cent? If you listened to the Chinese bears, symbolised by the campaign waged by renown short-seller, Jim Chanos, such a fall would simply be China’s credit chickens coming home to roost. Chanos, who admits to never having visited China, recently described the country as “Dubai times 1,000 – or worse.”
Given the size of China and its role in the global economy, that is a scary prospect. Continue reading »