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Politics : Formerly About Advanced Micro Devices
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To: tejek who wrote (335342)4/25/2007 5:31:40 PM
From: RetiredNow  Read Replies (1) of 1577829
 
I think most of the money comes from massive current account surpluses, as well as foreign investment into China. They are awash in money supply. If they float the yuan, that will result in an immediate restructuring of the economy, which will act almost exactly like a massive fiscal tightening similar to when our Fed raises interest rates. That will result in a chilling effect across the board, including a revalution of bank loan values, which might put alot of China's banking system in the red, which might undermine confidence in the economy, and on and on. Recession would be a sure thing.

That's why they are moving slowly but surely towards a free floating yuan, instead of pulling the trigger completely in one blow. The Chinese finance ministers are actually acting as smartly as any Westerner might. It's just like others have said...they have a tiger by the tail and they are trying not to screw it up.
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