China has partially floated its currency. It is now appreciating by about 5% per year.
China may allow the RMB to strengthen by 7.5% per year At 7.5% per year, the 40% reduction that many in the US are clamouring for is handled in about 5 years.
btw: the US $ sank 60% against the Euro (from .82 US$ vs 1 Euro to 1.36 US$ vs 1 Euro) over the last seven years and almost as much against the Canadian $. How much pressure is there on the USA to stop deflating its currency ?
This trend would mean that China would pass the USA in overall economy in about 2020
Here is an indicator on the financial pressure on the RMB to appreciate (created by Milken Institute and Xinhua Finance). RMB pressure Indicator This is increasing financial pressure not political pressure.
China is adding a lot of cleaner hydroelectric power and some nuclear and natural gas.
The dams also help them move more freight by river instead of truck (river 10-20 times cleaner) or rail (river 2-4 times cleaner)
China has some 64 nuclear plants in the pipeline. Currently completing about 2-4 per year.
There is talk of 300+ nuclear plants by 2050
By 2020, China should have 42% non-coal energy versus about 20% now.
According to government statistics, more than 50% of world mass urban rail construction projects will be under implementation in China in 2006. Right now, there are more than 30 cities in China that have been building or plan to build their own urban rail systems. China will need investments over USD $25 billion worth of railway lines during the eleventh five year plan. Before 2010, the total length of urban railway line in Beijing, Shanghai, Guangzhou three cities will reach 1000 kilometers in comparison with 300 kilometers now.
China is closing the smallest and dirtiest coal plants and is making somewhat cleaner bigger coal plants. Not ideal but has the US shutdown any of its dirtiest coal plants ? No. The USA has grandfathered protections in to let the oldest and dirtiest coal plants continue to pollute.
China is making electric cars, like the flybo
Tianjin Qingyuan Electric Vehicle Co. Ltd. (QYEV) is building a 165 million yuan (US$21 million) factory capable of producing 20,000 electric powered vehicles a year in the northern port city of Tianjin. The plant will produce cars powered by battery, hybrid power and fuel cells. It is expected to be completed at the end of 2007.
In 2006, Chinese bought 16 million to 18 million electric bicycles.
What is the US doing ?
trying to pass 35mpg CAFE.
Might get 28 nuclear plants by 2020. First might get done 2015.
Might clean up some coal pollution emissions (mostly not CO2 but at least saving some lives if it passes)
Coal usage likely to go up as a percentage.
Also note $287 billion of what China makes goes to the USA. $182 billion goes to the EU.
UPDATE: An economic argument that shows that those who think that an appreciated Chinese currency will solve the trade imbalance.
The chinese yuan has depreciated by over 50% against the Euro, while appreciating by about 7% against the USD over the last 7 years.
If nominal exchange rates were driving trade flows as commonly alleged, then Chinese exports to the U.S. should have been growing faster than to Europe. The data show something completely different... Plotted together over that entire decade, these two series look nearly identical. This is because the same real economic forces -- e.g., China's relative abundance of less-skilled labor -- have been driving both sets of trade flows
Put it this way: In a counter-factual world where over the past decade China allowed the yuan to float against the dollar, the U.S. would still have run a large and growing trade deficit with China. The real economic forces of comparative advantage that drive trade flows operate regardless of which nominal prices central banks choose to fix.
There is also some discussion of sterilized vs non-sterilized intervention.