This is mere speculation on my part, but with all of the coverage of China’s move to un-tether the Yuan has made me curious. For the most part the media has been all smiles and every "expert" claims this will relive trade concerns. This move has been praised by the media:
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Here:
Here:
http://wallstreet.blogs.fortune.cnn.com/2010/06/19/china-grants-geithners-wish/
Why would China make such a move? How does this benefit China?
Again this is merely speculation, but what if China by allowing the Yuan to float they were increasing their buying power? Would they be able to secure more resources overseas as demand increases?
By holding the Yuan so low for so many years they have already reached a point where they have driven a large percentage of the worlds manufacturing capacity to their shores.
Why would China make such a move? How does this benefit China?
Again this is merely speculation, but what if China by allowing the Yuan to float they were increasing their buying power? Would they be able to secure more resources overseas as demand increases?
By holding the Yuan so low for so many years they have already reached a point where they have driven a large percentage of the worlds manufacturing capacity to their shores.
What is their expected outcome?
Why NOW are they willing to cave on this?
I believe in the long run this help them to secure more raw materials. Additionally, it will help to build their own domestic consumption and eventually lead to a false inflation in the consumer markets of the western world as they see their basic goods sky rocket in cost.
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