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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: TobagoJack who wrote (53205)	9/10/2004 11:33:56 AM
From: Taikun	Read Replies (1) of 74559

China makes a lot of things. More than half the goods in Wal-Mart are from China. How do you see pent-up demand in the other pegged ones: Ringgit and HKD? Is there not the argument that unpegging would attract more investors to the market? Unpegging also creates a more liquid, transparent Forex market. It will only be a matter of time before China will export their cars and then planes. Business software is around the corner. Companies and gov'ts will be more attracted to hold Yuan reserves if it is unpegged and becomes a more transparent currency. Exporters of raw materials will have Yuan income they will want to hedge or swap. Importers will want to hedge the costs of, say, Christmas toys months in advance. Unpegging would allow foreign investors to more easily add Yuan to a basket of major foreign currencies for investments-that currently includes Yen, Euro, USD, CHF, GBP etc. One day the flood of USD from around the world will come back home to the US and drive down the value of the US. If the Yuan were unpegged, some of that would be converted in other major currencies. If the Yuan were more freely available, would it not increase demand? Look what happened to the Yen going from 300 to 100 in a decade or two-when it became unsoggy and they began selling cars, TVs and Walkmans in the US in the early 1970s. China is following in their footsteps. Look at primary trade inputs by nation. China's primary input to the global trade equation is cheap manufacturing labor-and they are cornerning the market. India is cheap services labor. Canada, Australia are cheap materials inputs. Brazil is cheap food inputs. America is a provider of expensive services and products, a military machine, and a provider of reserve currency. Norway is oil etc etc I am curious why you think the Yuan could not do the same as Japan when unpegged?

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