Doug, there are no reasons to devalue RMB right now, the china people's bank is still supporting US dollar not RMB, RMB is still on up-trend pressure against US currency, China had around US$43 billions surplus only on trading area last year, the china foregin currency reserve is over US$140 billions and increasing.
the devaluation of other Asia nation's currency will hurt china's export but nobody knows how much it will affect, I doubt it will greatly affect china competitive trading position and china economy, let's see some numbers:
The total amount of china import and export only accounted about 18% GDP of the Chinese economy last year. In 1995, Chinese import and export increased around 23%, the GDP growth of that year was about 10.2%. In 1996, Chinese import and export increased almost 0 (2%)! you guess how much the GDP growth of that year was, 9.7%! the only reason of Chinese economy slowing down recent years is tightening credit policy to cool down the overheating Chinese economy, until now the policy has been very successful and inflation almost went to zero last year, now china has enough room to relax the credit and stimulates the Chinese domestic demands, the bad news is the Chinese government becomes more cautious about cutting interest rates after the Asia currency crisis.
You are very smart guy to buy more shares at current level, fears and nonsense will go away and market will back to new high someday.
Good luck on your investment,
Gordon Shen |
