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  • The empty rhetoric

    The wonder of Hu

    Published: December 6 2009 19:20 | Last updated: December 6 2009 19:20

    When challenged to conjure a sentence that was grammatically sound but entirely without meaning, Noam Chomsky came up with: “Colourless green ideas sleep furiously.” China’s Central Economic Work Conference, which convened at the weekend to debate plans for the coming year, should produce some similarly senseless utterances. Guidance from President Hu Jintao’s Politburo was a classic of the genre: fiscal and monetary policy would emphasise “continuity and stability”, while enhancing “flexibility” to adapt to “new situations”. Ditto on the currency: last week Premier Wen Jiabao said China would “increase yuan flexibility while maintaining a stable yuan exchange rate”. Come again?

    It is perhaps unfair to pick on China: other policymakers specialise in doublespeak and evasion (just how extended is Fed chairman Ben Bernanke’s “extended period”?). But it is a fair rule of thumb that the emptier the rhetoric, the trickier the outlook. Back in March 2007 Mr Wen was cocksure enough to pronounce the Chinese economy “unstable, unbalanced, unco-ordinated and unsustainable”. Now, the syntax remains fine but the semantics less so. Only in China could Rmb10,000bn of new bank loans – double the run-rate of the preceding few years – be termed “moderately loose” policy.

    China will be the only one of the world’s top 10 economies with a higher real gross domestic product number this year than last – an achievement in itself. But in 2010 and beyond, the costs of that achievement should become more obvious. Investment in fixed assets accounted for 95 per cent of GDP growth in the first nine months, for example. And yet China’s 2009 Incremental Capital Output Ratio – a measure of spending efficiency, calculated by dividing gross investment to GDP by real GDP growth – will be less than half as efficient as its own average of the 80s and 90s, says the International Monetary Fund. No subtitles needed.

    FT.com / China - The wonder of Hu
    “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

  • #2
    The need for balance

    My "impulse guess" is that the RMB should be kept weak enough to allow foreign countries to buy Chinese-made goods, while being strong enough to allow for the purchase of foreign assets. A stronger RMB will allow for the purchase of foreign goods at relatively low prices, but at the same time will hurt exports - a large source of revenue for China. A weaker RMB would make Chinese exports affordable for the vast majority of consumers in foreign countries, but at the same time it would make foreign goods more expensive for Chinese companies. Both situations have their advantages and disadvantages.

    I doubt Beijing is ready to allow the RMB to appreciate in value just yet.

    Comment


    • #3
      LOL, I like to have my cake and eat it too.

      Note the PRC uses the USD to buy foreign assets not the RMB
      “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

      Comment


      • #4
        A vicious cycle (-.-)

        Originally posted by xinhui View Post
        LOL, I like to have my cake and eat it too.

        Note the PRC uses the USD to buy foreign assets not the RMB
        Which is why the RMB's value has to be kept at a certain level to promote exports. China has to sell to the US to obtain USD, which is then used to purchase petroleum and natural gas from countries producing them. Japan has been doing the same thing since the 1970s; sell cars to the US, get USD, buy petroleum from OPEC with USD.

        Didn't OPEC say they were going to move away from quoting prices in USD and instead opt for quoting prices in a "basket of currencies", among which there are the EUR, JPY, and RMB? USD may be the most famous reserve currency in the world, but some major countries have been calling for a move away from USD as the global reserve currency amid concerns that Washington's recent printing spree will soon make it DBR.

        Comment


        • #5
          I thought we're talking about Obama...
          "Only Nixon can go to China." -- Old Vulcan proverb.

          Comment


          • #6
            Originally posted by gunnut View Post
            I thought we're talking about Obama...
            There ya go, gunnut.

            Learn from Chaiman O-ba-ma, good model.
            Attached Files
            “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

            Comment


            • #7
              Attached Files
              “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

              Comment


              • #8
                Interesting...hammer and sickle flag...
                "Only Nixon can go to China." -- Old Vulcan proverb.

                Comment


                • #9
                  better then this one -- the return of the Qing Young Brave
                  Attached Files
                  “the misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all” -- Joan Robinson

                  Comment

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