Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: RealMuLan who wrote (36181)	7/17/2003 2:15:23 PM
From: EL KABONG!!!	Read Replies (1) of 74559

Hi Yiwu Zhang, But China should be really careful to take on further debt from the US. As long as China insists upon pegging their currency to the US$, they have no other choice than to invest/store their surplus accounts in US$ denominated assets. Removing the peg might be comparable to removing a large log that blocks the natural flow atop a swiftly moving river. Things will really start to move once the natural flow is returned. The problem is that no one knows who (if anyone) will benefit from the action. China (and the rest of Asia as well) fears that they will "lose". Europe senses that they (Europe) will "win". The USA could argue itself to be a "winner" or a "loser" depending upon how results are measured. My best guess is that the Chinese peg to the US$ will stay in place, at least until the Chinese officials feel that they have some sort of hedge against losing whatever inroads they feel they have made towards becoming an economic superpower. The best one might hope for is that the Chinese will revalue their currency to better reflect reality, but even that limited action might be months or years away. KJC

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