Friday, March 26, 2010
A Skirmish in the War of Words
Ripped off from my FaceBook posting earlier today:
Heh, heh! Whether to rise or not to rise, that is the question. Is it better to resist the evil Americans and persist in acting only in China's self-interest or "diaotou" (turn around) and do what is the normal state-of-affairs for global economic leaders? The proof of whether the RMB is or isn't undervalued is twofold: 1) whether or not the RMB would rise in value if allowed to float, with value set by supply & demand; and, 2) Purchasing Power Parity: Does RMB 682 go farther in Beijing, Shanghai or Guangzhou than US$100 will go in major American cities? In both cases, I'd suggest, the RMB is way under-valued. But this isn't just an economics debate. If it were, we'd all be bored silly (unless we were currency traders, importers or exporters, central bankers, or economists). This is, in a very big way, a political debate. And a debate about the (unfortunate, IMHO) rising nationalism of many Chinese (a recurring event) and the accompanying over-confidence that is evident in Chinese attitudes toward events of the last decade, That this influences foreign policy and expectations for the near future shouldn't be a big surprise.
Heh, heh! Whether to rise or not to rise, that is the question. Is it better to resist the evil Americans and persist in acting only in China's self-interest or "diaotou" (turn around) and do what is the normal state-of-affairs for global economic leaders? The proof of whether the RMB is or isn't undervalued is twofold: 1) whether or not the RMB would rise in value if allowed to float, with value set by supply & demand; and, 2) Purchasing Power Parity: Does RMB 682 go farther in Beijing, Shanghai or Guangzhou than US$100 will go in major American cities? In both cases, I'd suggest, the RMB is way under-valued. But this isn't just an economics debate. If it were, we'd all be bored silly (unless we were currency traders, importers or exporters, central bankers, or economists). This is, in a very big way, a political debate. And a debate about the (unfortunate, IMHO) rising nationalism of many Chinese (a recurring event) and the accompanying over-confidence that is evident in Chinese attitudes toward events of the last decade, That this influences foreign policy and expectations for the near future shouldn't be a big surprise.
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