China removes Yuan's peg to the Dollar

[Train]

Just heard it on Headline news, dont have a link yet...

But this is great news.

 

[frankie38]

My Walmart shopping spree just got more expensive.

 

[CottonRabbit]

Ouch, 2%

 

[Engineer]

This could actually hurt the US far more than it helps us....

I too thought that it would be great for the US but, in the end, it seems that lower oil prices for China will boost them regardless if the trade is lowered a little. It will make oil more expensive for the US as well as increase prices on Chinese produced goods. Not quite what I exptected, but then again, anything can happen.

BEIJING - China's decision to cut its currency's link to the U.S. dollar could make its exports more expensive over time, giving a slight respite to foreign producers trying to compete with an avalanche of low-cost Chinese goods.

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But Chinese companies also could get a break as prices of imported oil and other raw materials fall. And a stronger currency would make foreign assets cheaper for Chinese buyers, possibly prompting more takeover bids like the one launched recently for U.S. oil company Unocal Corp.

The decision to base the yuan's state-set value on a basket of foreign currencies such as the euro or the Japanese yen could see the yuan ? also known as the renminbi, or "people's money" ? rise in value as the dollar weakens against those currencies, dragged down by mounting U.S. budget and trade deficits.

"Over the next couple of years, we wouldn't be surprised to see a 10 to 15 percent appreciation of the renminbi against the U.S. dollar," said Nariman Behravesh, chief economist for the financial firm Global Insight in Lexington, Mass.

A rise in the currency would push up the price of Chinese goods in dollar terms, heightening competition with other low-wage makers of shoes, clothes and appliances such as Bangladesh or Indonesia.

Americans, Europeans and other foreign buyers would pay more for Chinese-made T-shirts and television sets, while Chinese would see imports get cheaper. A more favorable exchange rate also could prompt more Chinese tourists to travel abroad.

"It will slow down the growth in exports a little in China," said Behravesh. "This kind of a change in currency isn't going to change China's competitiveness a lot. But it will take Chinese competitiveness down a notch."

The central bank of Japan, the biggest Asian exporter, welcomed China's announcement, even though foreign currency traders bid up the yen against the dollar in reaction to the news.

Japan could benefit from having the yuan linked to a mixed basket of currencies, which could restrain the yuan's fall against the yen the next time the dollar drops, reducing the impact on Japanese exporters.

The impact on Chinese exporters would be cushioned by an equal fall in the cost of imported raw materials, easing pressure on their profit margins.

There are few authoritative calculations of the potential impact of a revaluation in China.

But an estimate by Zhai Shihong, a senior official at the National Bureau of Statistics, says a 5 percent rise in the yuan would cut export growth to below 10 percent, from 35 percent last year.

And even a 15 percent jump in the yuan against the dollar would be considered modest compared with the much larger swing by the euro, which has risen by about 40 percent against the U.S. currency over the past three years, Behravesh said.

Pain also could be felt abroad as retailers that rely on China as the world's supplier of low-tech goods are hit by higher prices.

In the long run, many experts believe a stronger yuan will have little effect on the U.S. trade deficit with China, which hit a record $162 billion last year, much less return manufacturing jobs to North America.

A stronger currency also could encourage more corporate takeover bids by Chinese companies, which have spent billions of dollars on foreign assets in an effort to establish themselves as global competitors.

"It could accelerate that process, because U.S. assets will now be that much cheaper," Behravesh said. "So I could see some more Chinese companies making takeover offers."

 

[CaptnKirk]

Oh boy ! Lets cut off our nose to spite our face.

This is the beginning of a slow and deliberate economic war orchestrated by China designed to undermine our economic base.

China dosen't give a damn about our short term investment, they intend to let us sell ourselves out.

 

[ajf3]

It's NOT floating... they just revalued it and pegged it against a lower number.

 

[Jave]

Oh boy ! Lets cut off our nose to spite our face.

This is the beginning of a slow and deliberate economic war orchestrated by China designed to undermine our economic base.

China dosen't give a damn about our short term investment, they intend to let us sell ourselves out.
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Spending in US is gonna go down, Chinese will have more buying power and may takeover more US companies. My hobby of building computers is gonna get a kick.

By the way "CaptnKirk" US has been after China for a while for this move, to me it looks like a "deliberate economic war orchestrated" by white house rather than China.

 

[Moonbeam]

Clinton is responsible for this.

 

[chowderhead]

Originally posted by: ajf3
It's NOT floating... they just revalued it and pegged it against a lower number.

I believe that China will slowly loosen its monetary policy and allow its yuan to float in a broader ranger over the next couple of years. I expect it to float almost freely by the time the Chinese host the Olympics.

 

[frankie38]

Originally posted by: Moonbeam
Clinton is responsible for this.

I think he other issues on his mind and in hs mouth.

 

[CaptnKirk]

By the way "CaptnKirk" US has been after China for a while for this move, to me it looks like a "deliberate economic war orchestrated" by white house rather than China.

Been watching that for longer than you know - we didn't get nearly what was hoped for, and this will affect us more adversly as they tie up more and more of our financial debt structure. Just a matter of time before they start twisting and manipulating our markets to their advantage.

They don't have to contend with the mentality of the Great Unwashed that buy everything at Wal-Mart to impress all their Trailer Trash friends.

 

[ntdz]

Good. This is probably a first step towards allowing it to revalue, and they probably did it under pressure from the USA and EU. At least they're doing it though..

 

[imported_Tango]

Originally posted by: ajf3
It's NOT floating... they just revalued it and pegged it against a lower number.

No.. they pegged it on a basket of ten foreign currencies...

 

[gsaldivar]

The yuan will now be allowed to trade in a tight 0.3 percent band against a basket of foreign currencies, the government said. It didn't say which currencies.

It said the central bank would announce the yuan's closing price each day, and that rate would be the midpoint of the next day's trading band..

http://www.msnbc.msn.com/id/8654171/

 

[Acanthus]

Sell all your walmart stock

 

[frankie38]

Originally posted by: Acanthus
Sell all your walmart stock

not so fast. higher prices at walmart means higher revenues! that is, if people keep shopping of course and the volumes do not go down due to higher prices. that could translate to more profits.

 

[Acanthus]

Originally posted by: frankie38

Originally posted by: Acanthus
Sell all your walmart stock

not so fast. higher prices at walmart means higher revenues! that is, if people keep shopping of course and the volumes do not go down due to higher prices. that could translate to more profits.

The only reason the sams club half of walmart (and costco too actually) are turning greater profits this year is they are pushing the Premium memberships ($100) hard.

Sales are already down significantly, people dont want to fight the lines, or deal with the horrible customer service that comes along employees being paid ~$7 an hour.

A 2% increase in cost, which will almost certainly be reflected in price, with other increases over time, will make chinese goods put the hurt on the walmart.

 

[frankie38]

Originally posted by: Acanthus
[A 2% increase in cost, which will almost certainly be reflected in price, with other increases over time, will make chinese goods put the hurt on the walmart.

Of course higher cost of goods needs to be passed onto the price in order to maintain margin and profits.

Oil companies, passed on higher oil prices and people have to keep buying gas and energy. so Oil profits are at record levels.

Now, we can debate if walmart, target, costco, or any retailers will get hurt all day.

Ultimately, we the consumer will certainly be hurt by higher prices.

 

[EatSpam]

Originally posted by: Train
Just heard it on Headline news, dont have a link yet...

But this is great news.

Finally, a step in the right direction. Now, if they'd just adopt western style labor and environmental regs plus allowing Unions, we'd be in even better shape.

 

[Vic]

This is bad, not good. The dollar will devalue further, increasing inflation and raising interest rates. T-bonds took a dump today... the 10 year is off 30/32nds. That has a nearly direct correlation with mortgage rates -- they just went up more than an 1/8th in rate today. And the Fed is certain to raise the discount rate again, and that will have a direct effect on consumer loan rates. A lot more going on here than just your precious Wal-Mart, people.

 

[EatSpam]

Originally posted by: ajf3
It's NOT floating... they just revalued it and pegged it against a lower number.

Doh. That's not quite so great of news...

 

[Vic]

Originally posted by: EatSpam

Originally posted by: Train
Just heard it on Headline news, dont have a link yet...

But this is great news.

Finally, a step in the right direction. Now, if they'd just adopt western style labor and environmental regs plus allowing Unions, we'd be in even better shape.

LOL! They are communist. Communist, do you understand? Government is God Almighty and the people are damned. Tree-huggers and union-organizers get nothing but 2 nines in the back of the head there.

 

[frankie38]

Originally posted by: Vic
This is bad, not good. The dollar will devalue further, increasing inflation and raising interest rates..

I could use a little inflation, thats not a bad thing. Agreed bad news for people with variable interest rate debt, refinance to fixed ASAP.

Maybe its time to buy gold again.

 

[EatSpam]

Originally posted by: Vic

Originally posted by: EatSpam

Originally posted by: Train
Just heard it on Headline news, dont have a link yet...

But this is great news.

Finally, a step in the right direction. Now, if they'd just adopt western style labor and environmental regs plus allowing Unions, we'd be in even better shape.

LOL! They are communist. Communist, do you understand? Government is God Almighty and the people are damned. Tree-huggers and union-organizers get nothing but 2 nines in the back of the head there.

Nothing is eternal. Communism will end there someday.

 

[halik]

Originally posted by: Train
Just heard it on Headline news, dont have a link yet...

But this is great news.

finally... they didn't really have a choice because WTO was about to b!tchslap them anyway