

The Yuan: The cheapest thing going is gone - teawithcarl
http://www.economist.com/news/china/21579488-after-enduring-decade-criticism-its-weakness-chinas-currency-now-looks-uncomfortably?fsrc=scn/tw_ec/the_cheapest_thing_going_is_gone

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Stupendous
For anyone watching the EM Markets space, the RMB's rise has been one of the
most discussed topics of the year. With economic growth focused on exports, a
weaker yuan was integral and the source of much scrutiny from the US. So there
has been confusion as to why the government has made moves to strengthen the
yuan when economic data has been deteriorating.

The real reason is that saving the exporters is no longer the priority.
Exports have been falling and the trade surplus has shrunk, and global demand
is still weak. Instead, the government is focusing on investment/capital
flows. With a strengthening RMB, flows/hot money is less likely to leave the
country and the government is actively courting capital inflows. If they were
to let the yuan appreciate now, the amount of investors running for the exits
would be unprecedented and cause widespread panic in the market, and stability
is their current goal.

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seanmcdirmid
I guess I'm an accidental currency speculator, having most of my savings in
RMB and the rest in CHF. It is definitely good for those of us who earn RMB,
vacations are much cheaper. But imports haven't really fallen accordingly; I
will believe it when Apple lowers their prices according to the exchange rate
value (they are out of synch now, normally their prices are pretty close + 20%
tax).

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contingencies
Spot on. After watching the value inflate over the last 10 years, I left! It's
too damn expensive to be in China now. Imported products are ridiculously
expensive, too. Wander down to Hanoi just over the border in north Vietnam for
a pleasant shock!

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seanmcdirmid
Are prices really much better in Hanoi? I mean for imported goods like Levi
jeans, Apple computers, cars, shoes (all of which are made in China, but...).

I'm OK with the expenses, I just shop when I'm on holiday in the states.

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contingencies
Beer, wine and cheese - yeah. Most food - yeah. Hotels - iffy, most people get
taken for a ride, but there's good deals I would say are cheaper than China
given location and quality. So all in all - yes, it's far cheaper (and far
more international!) in my opinion.

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seanmcdirmid
Food made locally is cheap in China also. I'm not complaining about restaurant
prices, even the good ones that serve western food (and WTF, why are
hamburgers in Beijing better than anywhere else?).

Hotels definitely are iffy in China, most people get ripped off. I don't
bother holidaying in China, if I want the beach, its like Thailand or
Philippines, the values are remarkably good off peak. I haven't tried Vietnam
yet, I heard it wasn't really a resort place yet.

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hkmurakami
The question is how this impacts the various countries that trade with China,
as well as China's export economy as well.

Then in turn, how will the western markets, both real and financial react,
especially in light of the US Fed giving signs of winding down fiscal
stimulus?

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djvu9
Yuan is strong because it is manipulated by the government that controls 1.6b
people in a global market. But it is not sustainable because the bill printing
machine is now obviously out of control.

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mtts
Wait .. doesn't turning on the bill printing machine weaken a currency instead
of strengthening it?

