Sunday, April 08, 2007

Insider Reaction from China

[Thanks to for the photo.]

Andy Xie, Chinese economist, reacts here to some questions at Bloomberg. (Look for the Audio/Video report in the list for today's date.)

The two points I found most interesting were:

1. The Chinese financial authorities might be making noise about letting the yuan float; but in the long run, their main focus is their employment situation. They have a conflict between their international relations and their internal relations. While on the one hand they might want to play fair with their trading partners and let the yuan out of its pegging straightjacket, they cannot allow a sudden blow-back that might disrupt their employment progress to date, because there are too many Chinese looking for work and a hitch would destabilize the whole country. This is understandable. (Katy comment: The Chinese got themselves into this pegging straightjacket in the first place, not us -- although no one here seemed to object while it was starting up. There was just too much profit on the horizon for our own outsourcing manufacturers. As Xie points out, a pair of Nike shoes priced at $40 is probably selling at $120 in the US [my figures.])

2. The US trade sanctions against certain paper commodities are a symbolic gesture. When the US starts to put tariffs on Nike shoes, then we'll know they're serious.

Interesting interview.

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