Now the flip side, because there's always one, is China revaluates and they end up paying LESS for goods abroad (revaluate means your currency appreciates thus you can increase imports). But of course we know that China exports more than imports. So if their goods are more expensive people will stop buying them. In this case you'll find the main argument of Chinese goods--they'll be more expensive and money will stay in the US.

Of course, the whole system is dependent on prices. It's a catch 22, Yankees love their cheap walmart crap and won't pay for more even if it means importing from china over Delaware

China is thought to be overheated and at an expansion pace they can't support. But think of it, you show a billion Chinese who live with significantly less a day than Americans a catalogue to buy stuff, you'll find that there's untapped potential within China to support their economy........... We'll see if the latest changes will do anything on the world stage.

China has confirmed by the way that they're releasing their floating rate to the USD.

If the Chinese let the RMB rise, it just means they are selling more of their earned dollars (probably funded from trading, not biting into their existing stock-pile), meaning the value of USD they would still hold would fall at market prices (in RMB) so the PRC would have made a paper loss, of sorts. This hurts no Chinese individuals or companies, just the country's treasury I suppose, so no harm no foul.

The Chinese individuals and companies would be holding more valuable RMB, so they would have done well (except they can't sell the currency, so it's a little meaningless). They would of course find their exports a little more expensive, and imports (oil & materials) cheaper, so maybe there would be more incentive or domestic consumer spending, further encouraged by the suggested pay inflation rate of c.30% in the citie of China since lunar new year.

Key point seems to be that the PRC have been supplying goods on credit to us in the west for years. At some point they are going to want to cash those cheques, but I don't think that point will come until the PRC government decide they want to spark domestic consumption, and I don't think we're there yet.

Do you?

RK

If they do float their currency to a greater extent, it could be a game changer. This would mean that they would likely not need to purchase as many US dollars which could mean an increase in our interest rates. These will be interesting times.