Comments on: China lifts rates — now what about the yuan? Mon, 26 Sep 2016 03:26:00 +0000 hourly 1 By: Neander Thu, 21 Oct 2010 04:04:38 +0000 The thought that there exists in China a “consumer collective” with a voice, as if their demand can play out as a factor in their government’s decision on rates, either forex or lending, is a Westerner’s hubris.

In this decision making process at the highest levels of a central authority, there is real-estate, yes. There is export of the manufacturing output, yes. But that is it!

There is an obvious wait-and-see approach to see how angry the governments of China’s main trading partners will eventually become with their manipulations of the Yuan. China knows that the lobbying multinationals are helping it continuously and through their influence the retaliations will most likely never amount to much. So there is plenty of time to contemplate the matter while the Chinese economy continues to grow faster than any other economy of size.

But would you ever see internal social pressure that would lead to a stronger Yuan? Never! The government has a full array of other tools to control the inflation problem with, which for the non-consuming Chinese is the mildest of problems right now in any circumstance. Gasoline is heavily subsidized and that takes care of the main thing which somehow has escaped the government’s control, doesn’ it.

No. It is entirely between governments, and if there is any bystander with a voice, that would be the multinationals, and unfortunately this bystander isn’t helpful at all if you happen to be a thinker wishing for a higher Yuan as a matter of good principle.