SH wrote:
Quote:
So how would you argue China's currency is devalued?
The argument is that the currency is manipulated by the Chinese gov't, and that the manipulation tends to keep the currency undervalued -- sometimes more sometimes less. Over the last couple of years the Chinese gov't has introduced policies to bring "more market forces" into the way the currency is valued, but, in the end, currency trades stay within a price window set by the gov't.
If the question is "how did Chinese companies get to their current economic position?" then the answer most definitely includes currency manipulation to keep the renminbi devalued over these last decades. A "what the hell could you ever be talking about?" response to American workers' concerns about the fairness of this policy and its ramifications in the US is unfortunate.
I know your post was just about sticking it to Trump in what ever narrow way you could, and not necessarily trying to diminish the importance and disparate impact of the historical currency manipulation he was referring to.
My post was about a desire for our president to rely on facts, not fiction, when making declarations (and potentially policy).
One cannot deny that China uses some intervention on occasion to influence its currency. However, it is not always selling its currency to make it cheaper. For example, from mid-2014 until the end of 2016, for 2.5 years China was a net
seller of USDs (
buyer of the yuan), and in doing so reduced its FX reserves from USD4.0tn to USD3.0tn. Why was China buying its own currency? Because its economy was doing less well, the USD was strengthening globally, and there were increasing outflow pressures from domestic investors in China who were starting to think owning their own currency was not such a good idea. During those 2.5 years, the yuan fell by 12% vs the USD. If China had not bought USD1.0tn worth of its own currency during that time, the yuan would have fallen significantly further during that time. But China prevented it from doing so.
In other words, from 2014-2016 China
prevented its currency from weakening more than market forces would have done, by buying its currency. From 2017-today, the yuan has appreciated almost 10%, during which time China's FX reserves have barely moved. That means China has not been doing much to stop the yuan from appreciating over the last 15 months.
So again, when Trump implies that China is manipulating its currency to be undervalued, the evidence simply doesn't support that statement.