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RMB Finally Goes Strong Yuan's not exactly free-floating. If the yuan were really left to the market's own device, the appreciation of yuan would far exceed 2%. The Chinese government will not allow that to happen because that could lead to a massive capital flight and an extremely volatile market at least for the near term. This is of course only a guess--no one can truly predict the Chinese government's next moves--but I think RMB will only be allowed to rise at a pace where there's little possibility to profit from speculative currency trading, i.e., return from the stock market will equal or exceed that from the currency market. This is hardly surprsing--We all know the Chinese have always favored gradualism over shock therapies. When will the real estate craze come to an end? Or will it? I always wondered if there's anything uniquely Chinese to real estate booms. In the U.S., wherever there's a significant Chinese population, the prices of homes and luxury cars (what economists call conspicuous consumption) are always higher. It could be possible that Chinese are drawn to these areas where demands for homes and luxury items are high, i.e., lots of rich people, but could the Chinese actually be driving up these prices? :) Trying to determine causality is an economist's eternal plight... |