1 USD = 6.9966 RMB

OMG.... T T

I'm glad that these bloodsucking gold diggers of factory owners need to shut down their operations. But it's a sad story for all those poor migrant workers who will lose their job. Factory shutdowns already rose at the end of 07 in the face of the new labour contract law, and will soon be exacerbated by the USD-RMB exchange rate.

Creating new jobs will be a challenge, but don't forget that net exports still account for only about 10% of China's GDP. Let's hope the domestic market and government intervention will heal some of the wounds.

exports still account for only about 10% of China's GDP?

but i heard that date account for more than 30% of china's GDP/

what is wrong.

@ lin: Actually, exports account for approx. 40%, imports ~30%. Consequently, net export is ~10%.

For further reference, s. this article: http://www.economist.com/finance/displaystory.cfm?story_id=10429271

I can't tell whether Jonathan Anderson is right or wrong, but his remarks sound quite logical to me.

But your objection is still reasonable for I overlooked that the currency problem will cause exports to sag but imports likely to increase. So this indeed adds some significant upside risk for rising unemployment.

Too bad I am paid in US dollars and living in China, between the falling exchange rate and rising inflation, I get hit from both sides. Just means you have to be more cautious about how you spend your money I guess.

Jianshuo,

I posted on this topic at length after transferring money at 6.9835 yesterday! There is some debate over who are the winners and losers of a strong RMB. Frank Gong of JP Morgan has some great thoughts on this topic -- basically highlighting the miraculous 20% productivity growth which has allowed the export sector to survive in the face of higher input prices, higher wage prices, and RMB going up.

http://tinyurl.com/4wq85l

Responding to ZL, I have to say that being paid in RMB and saving in dollars I'm fairly happy at the moment.

USD devaluation is not a good trend for the following simple reasons: More foreign currency will flood China. The flood will worsen the already bloated bubbles of housing market and worsen the already serious inflation. At the same time, it will squeeze the exporting sectors.

@ jqian: You're damn right! FX inflows ytd have already been staggering and are expected to continue. Unlike in previous years, China is not able anymore to allocate all of the inbound money to certain categories such as trade, interest gains, tourism revenues etc. A significant portion of the FX inflows is simply undefinable hot money.

In such an environment, prices are bound to rise due to rising money supply. The problem is not only too little food supply anymore, but too much money in addition to that. Even if China manages to contain food and energy inflation through price controls, excess money will automatically shift inflationary pressure into non-food and non-energy sectors.

What I'm surprised about most is why so far (at least to my knowledge) none of the most renowned Western economists has publicly spoken with the Western media about this year's hot money phenomenon hot money in China. I am aware, though, that Chinese economists - such as Ma Jun, China Chief Economist at Deutsche Bank - have spoken and written about it in the domestic media.

the RMB is still undervalued at 6.999 v. 1 USD. Fair value is between 4 or 5. this means that more American jobs will be sent over to china, and china will use the money to buy more T-bills.

Thank you Jinashuo I am not sure if you will keep this comment as is, but thank you for bring my attention to it. Inspired by the exchange rate trend, that what you wrote on this post, I just set up a website about it. I am doing international trade and checking the changes everyday. This site is updated on daily basis and sometimes I will add news or other most updated information. I hope anyone can find it and give me confidence that I can make it useful.