frankly, not sure if the inflating prices will directly benefit farmers all that much, farmers in argentina, brazil and other major crop/agricultural production countries don’t seem too happy; when everything is angled at export, u may find an ironic situation where production countries run short of food, even in this modern world lucre wins over common sense.

apologies to brad, this is off topic buthope u’re grinning and bearing with it!

Looks like this is exactly what they ended up doing. (Government officials doing what they said they would do. Yikes!!!! Alert the media!!!!)

It’s been decades since anyone local in Guangzhou worked in the export factories, and most of the employment there comes from people in the interior. If the factories are moving from Guangzhou to the interior, then I think everyone ends up benefitting. It’s too late to start training and education, but Chinese parents have been drilling their kids to get a better education for the last twenty years, and the product of that effort is starting to come online.

I should point out that globalization and the trend to high skill work, sharpens the different between people with skills and people who don’t, and this means that groups without access to education and global social networks can get very, very angry. This is the main reason for the Tibetan uprising I think.

Also, I think that if the inflation is mostly in food, this means that farmers (most Chinese) end up benefiting and having farm incomes increase means that people are no longer as inclined to go from Hunan to Guangzhou.

Agreeing with Moldbug – it has a strong incentive to get its crawling done now, so that it has all the ammo it needs if (or when) a US recession feeds through to export demand.
Written by moldbug on 2008-03-26 14:58:29

Could the split personality nature of the economy and markets (assuming that you could include HK alongside Shenzhen and Shanghai) mean that HK could act as a test case and steam valve of sorts for currency issues relating to the yuan? For instance, “redirecting” hot money flows and speculative pressures towards the bloated Hang Seng by allowing faster appreciation if not depegging of the HK $ . thereby enacting the boom-crash scenario in a more controlled environment and taking the pressure off the mainland. Ideas, Mr Stephen Green?

Agreeing with Michael Pettis on the restructuring part, Guangzhou has long been seen as a manufacturing backyard for the export industries, it would be time for a shift to services, the problem is, have they been nable to institute the training and education required for that shift? It’s no longer a situation where a small educated elite could run a system dependent on untrained or poorly educated labour force; isn’t that what makes the shift from manufacturing to services so difficult? For some inexplicable reason, Shanghai is looking more and more like an asian version of the City in London, where banking is elite but so exclusive that it looks like a mirage.

Agreeing with 2fish, the Olympic hype seems to have clouded lotsa people’s views, unless you’re in the hospitality, construction or tourism industries, or have bought into the property boom, the Olympic boom is likely to have been a blip on your radar. For those who see these events as justification for property speculation, too bad; by the way, the same “promo” line has been used in Shanghai, except the olympic theme was substituted by the world expo. (apologies to brad for the off topic comments here!)

I do wonder why people are so fixated on the Olympics. The impact of the Olympics on economic growth and economic policy is basically negligible, and its impact on political decision making is small.

those are great times. Rebalancing is finally happening.

BOC is a branch, but branches of foreign banks can get access to the discount window.

(See eligibility to borrow)

http://www.frbdiscountwindow.org/discountwindowbook.cfm

I think the reason that Korean and Chinese banks might be hesitant to borrow from the Fed is that once you take money from Uncle Sam, you are going to have inspectors from the Federal Reserve pouring over the books of the parent company. (Which is also why stand alone investment banks might be skittish about getting money from the Fed.)

Also, unlike the Korean and Chinese central banks, the Fed is unlikely to loan money to a foreign bank which is actually insolvent. The problem with the Chinese banks wasn’t a liquidity issue but a solvency issue, and I think the same was true for the Korean banks. If you need recapitalization then a loan from the Fed is not going to help you.

The really interesting thing is to see how much power the Fed is amassing at the expense of the SEC. The big battle is Bernanke versus Cox, and Bernanke is winning this. The other interesting thing to watch is whether this will be the end of the independent investment bank. Also, it does seem interesting that the financial system of the US is starting to look a lot like the Chinese financial system with four really huge banks that are basically controlled by the central bank, which exercises its power by the fact that it can print money, whereas private shareholders can’t.

“i’m sorry, i don’t want to sound rude, but on march 19 cny ndf implied appreciation was 15%, so mr green was not making any “bold” calls that day.

all these people that talk about appreciation don’t listen to what the press says locally and don’t have much sense about reality on the ground at all. reality is production is already being killed in guangzhou and other se coastal areas, and if you reval by immediate 10% or more you are just gonna make sure it does not come back. yuan is the new gold that everybody has to trade their dollars into instead of just staying cool and having cash for an opportunities that will arise from this dislocation.

Written by chegewara on 2008-03-25 21:54:58″

Well…First, where do you get your prices? On March 19th the 9m NDF was pricing in 6.4347, a 9% appreciation to (roughly) year-end. While the 12m (which takes us to March 2009) was priced at 6.3073, but that wasn’t 15% either; its a 11% move. Spot was 7.0721. So 15% over 2008 was considerably above what NDFs were trading at and have been trading in general. One might also note that have been a bad indicator of actual CNY moves generally; so its not a great reference point.

Comments along the lines of ‘its obvious you don’t read the local press’/'dont know reality on the ground’ are just a little bit too silly to reply to directly. Michael P and Brad make the good, broader point about how exports overall are doing OK – and that restructuring is taking place. If we wanted Guangdong to export USD 1 T-shirts forever though we would have a problem.

The other thing to point out is that China’s official trade data does not tell you about relative shares since a large amount of exports are re-shipped via HK. So you have to sit down and work out how much is re-shipped before you know how much up ends up in EU and US. Our numbers reflect that.