Monday, April 25, 2005

China Tests New Powers


It is an odd side story but instructive if one knows what is going on in Asia. Readers here can see clearly, there is tremendous tension between China and Japan. The Chinese were very loud about this up until today. Now they are flexing their arms in subtle ways.

Chinese remarks cause yen to soar

The yen hit a one-month high against the dollar and a two-month peak against the euro on Monday as comments from the governor of the People’s Bank of China sparked hopes of Chinese currency reform.

Speaking in China on Saturday, People’s Bank of China Governor Zhou Xiachuan suggested that the Chinese authorities may after all respond to international pressure to implement foreign exchange reform. “If there is more pressure from outside , it will force us to speed up our reform,” he said, reinforcing mounting market speculation that the Chinese authorities will soon announce a change to the renminbi peg. Any change in the peg is expected to be a revaluation, which in turn should lead to a broad rally in Asian currencies.

The yen appreciated in early Asian trade, hitting a one-month high of Y105.27 against the dollar. However, comments from Wei Benhua, deputy director of the Chinese State Administration of Foreign Exchange, that there would be no policy change in the “short term” saw the dollar pull back to Y105.80.

Talk about smart. The Japanese spend hundreds of billions of American dollars keeping the yen artificially low against all other currencies. This is to boost trade values. The Chinese do this too. As the Japanese joined America in calling for a stronger Chinese currency, the Chinese decided it is time for Japanese currency to go up, first.

Note how one official lights the fire, oh, hope springs eternal! America goes nuts! Finally, the Chinese will obey us! Then a Chinese official steps forward, after hours of currency turmoil to put the desired change off into the unknown future.

This is fun to watch or would be if I lived somewhere else.

Note how Americans, hysterical about rising Chinese trade power have utterly forgotten our problem with the Japanese doing exactly the same thing. You can bet, Tokyo doesn't forget this.

Meanwhile, Europe see saws on trade, too.

Gentle approach

"If there are some interests in Europe who want to see some sort of trade war with China launched over this, then they are looking to the wrong person," Mr Mandelson told a news conference over the weekend.

"I don't regard China as a threat but as a welcome and important member of the international trading community."

An EU official said that they hoped to avoid "formal" talks with China.

"If we get to formal talks, then things are pretty serious," the official said.

Gentle? Try "gingerly". Collectively, we all want cheap stuff all the time. We also know this is bad because we lose manufaturing jobs but the lure of not paying a lot is too high a temptation. Corporate powers on the planet love China because it is their dream: to make tons of money while not working at all, it just pours in. So off goes the factories to China and the rich are much richer and the workers are getting bit..not too hard because of the cheap stuff but it will change when China begins to demand a fair share of the spoils of this planet: 25% of earth's resources, not 10%.

And everyone is nervous of Chinese power and powerless to stop it because of the appearance of exploitation, namely, rich people in Europe and America are getting richer thanks to Chinese labor. So they will support this system until it collapses. I suppose the plan is for the rich to live in select enclaves protected by the new super powers. This is their hope.

Unfortunately for them, it won't work out. Not at all.

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