Hawk, they got 3 things wrong.
First, the obsession with the Olympic Games is over-rated. Sure, it's interesting. But it's trivial overall. It is NOT driving China to any extent. Every time there's a mention of China, the Olympic Games pops up to explain how pressured they are over it. They are not. It's just some stupid physical games people play. Running around, lifting heavy things, jumping, riding bicycles quickly and swimming much much slower than dolphins, which can also do big jumps and flips and pirouettes in the air, while swimming. Dolphins aren't so good at weight-lifting, and riding bicycles, but neither are human swimmers.
But they got this part right:
<Let CHINA pay off any bribes to N. Korea. They can spend some of those tremendous dollar reserves they have collected from their trade surplus with the US.>
Except that China doesn't mind North Korea having nukes as it's a nice counterweight in regard to Taiwan. If things get hot in Taiwan, China and North Korea can lean on South Korea, which is conveniently located just over the border. I think they are more in unison than they let on. Just as the USA has nuke-armed Britain and France on their side, China might as well have nuke armed North Korea to keep South Korea in check [not to mention Japan and the USA].
It seems dopey to even think of bribing North Korea to not test nukes.
Here's a big wrong idea:
<Btw, what do you think about the premise, contained in the following article, that suggests that the Yuan was undervalued by 33%>
The yuan is NOT undervalued. It won't be revalued 33% or even 32%. What will happen is that China can avoid hassling people via taxation by the simple expedient [as Helicopter Ben said] of spraying money around. Except that they don't need to just throw it out of helicopters. Government spending can be done by way of freshly-printed kwai. If the theory is correct that the currency is under-valued by 30%, then they can print a LOT of money.
When, not if, China does what I say, [which they are no doubt doing already], it will cause inflation. Prices will rise, incomes will rise, interest rates will rise [though perversely, they might not, due to a lot of money sloshing around looking for somewhere to go - initially anyway, until people holding money realize they are being diluted and that they should own assets, not cash]. China will now be getting wage and salary increases as the population gets wealthier and competition for workers increases as Made in China continues to grow rapidly.
The other wrong idea is that there is a real estate "bubble". It's not a bubble. It's a repricing, which is sensible. 3 years ago I went to Beijing and spent quite a bit of time and $1000 investigating buying a penthouse apartment or two near Beijing train station is an upmarket area. It would have cost me NZ$170,000 and with fitting out would have been about NZ$200,000 for a very sumptuous accommodation right there in the heart of Beijing. In Tokyo, it would be worth NZ$4 million. That's a LOT of revaluation required to balance economic forces.
Beijing is the HQ of the world's most productive place in tonnage of stuff produced. It is also the HQ of the biggest country on Earth, using one language [written anyway]. My apartment [which I decided not to buy as it was all too much of a rush and I had to fly back to NZ before I could get it all done] should be worth at least as much as the Tokyo equivalent if China continues to develop [due to simple supply demand balancing].
Mqurice |
