It means that PBoC is likely controlling volatility evolution and let it increase progressively. Within 1-5 years of this volatility trend USD_CNY volatility will be in the same range as other FX.

Also not unreasonable.

“Propaganda is the deliberate, systematic attempt to shape perceptions, manipulate cognitions, and direct behavior to achieve a response that furthers the desired intent of the propagandist.” Source: Garth S. Jowett and Victoria O’Donnell, Propaganda And Persuasion, 4th edition, 2006.

I don’t think creating more jobs in the manufacturing sector at the price of capital deepening and efficiency is the answer. I’d say just the opposite: the more efficiency the better. Where China failed is to sufficiently promote the service sector. It came from a history of acute lack of material comfort for the general populace. Lack of a social safety net and political freedom are the main hindrance to the development of its service sectors.

Could China be the source of the next crisis? China was less affected in 1997-98, thanks to strict capital controls. Indeed, by not devaluing its currency it helped to prevent a worsening of the financial contagion. But China, more than its neighbours, may have drawn the wrong lesson—namely the need to keep its exchange-rate stable and to build up massive reserves. China’s monetary policy has been overly lax and low interest rates on bank deposits have encouraged a huge shift of money into its stockmarket. Thus Mr Roubini’s diagnosis of Asia does apply to China.

I wonder why china is not getting creative with ideas like social security, free medical care, free housing etc….. after all what does one need for a healthy economy……..confidence and secure, spending consumers……and that confidence can be created by short term spending….(false promises of secure future, say everyone gets social security after 5 years….no need to save for emergency..)

or maybe china is not as efficient and smart as we assume it to be, it maybe same as india….hundreds of corrupt,selfish politicians fighting for the kill….so busy that they dont know that they are missing opportunity to create enough for everyone in future.

i dont beleive that energy consumption in the same scale as usa is required for a efficient economy……since china and india are highly populous……they can easily live/work within 15 miles radius…..served by efficient public transportation….

in general, my sense was that the guardians of dc consensus orthodoxy have been rather keen to adopt china as a success of dc consensus policies (openness to trade, macro stability, low inflation) despite its deviations from orthodoxy (absence of clear land title, massive state banks, big state enterprises and the like). DC consensus on XRs has never been consistent — for a while pegs to avoid inflation were part of it, then it become your choice as long as it fits the impossible trinity (currency boards were ok, soft pegs not so much) and now perhaps there is more desire for flexibilty, but it is quite clear that the global XR system is becoming less flexible not more …

If the US government was willing to dump the ideological dogma and restrictions on high-tech products, the Chinese have enormous infrastructure requirement that would generate huge, capital intensive revenue exports for the US economy. For instance, Vice President Al Gore’s opposition to the Three-Gorges Hydroelectric project on the Yangtze river, terminated General Electric’s Power turbine and transmission contracts. The Clinton Administration killed any prospects for US export participation in Hydropower and Nuclear power development in China. The Three-Gorges Hydropower project was built anyway despite the US government veto of any World Bank financing for electrical power development. The Washington Consensus would rather have China remain as an underdeveloped nation to bully around.

Regards,

china will soon need to find another model for generating employment. i don’t think it is possible for the export machine to keep cranking out 30% y/y growth off a 1.25 trillion base.

incidentally, if you depend on the rest of the world to absorb your output/ generate export jobs, don’t you have to take the rest of the world into account? China’s solution to its domestic problems ironically enough has been american and european demand … which means america and europe have a say.

Reply:
Contrary to the Western centric thinking of US Economist pundits, the Chinese leadership has more than enough internal domestic problems before even considering the self-serving views of Washington. While the Chinese economy is experiencing fast growth, it is not nearly fast enough to absorb the surplus labor force. Unemployment is rising even among the skilled and educated with only half of recent university graduates able to find employment. The largest human migration in world history is taking place today with urbanization expected to account for 60% of China’s population by 2020. The economic perspectives of the Washington Consensus are irreverent to the myriad problems facing the Chinese leadership. It is rumored that Prime Minister Wen Jiabao may resign, not because of an internal power struggle, but because of physical exhaustion from his job of working 12-14 hour days.