March 03, 2008

China currency and economy will be third largest in 2008

The Chinese yuan is 7.10 to the US dollar

The Chinese yuan is 10.85 to the Euro

I have previously predicted that China's economy will be larger than the US economy on an exchange rate basis before 2020. and think it is most likely to happen in the 2017-2019 range

The German economy ended 2007 at about 2.364 trillion Euro.
China's economy ended 2007 at about 26.3 trillion Yuan. This does not include Hong Kong and Macau.
China's economy is growing at about 10% in 2007 and Germany at about 1.6-1.8%.

So currently as we are about to reach the end of Q1 2008, when the Euro is at 10.23 yuan to Euro or less then China is the number 3 world economy. By the middle of the year, 10.5 or better would put China as number 3 and by the end of the year 10.9 or better would be enough.

If Hong Kong and Macau are included then an exchange of 10.86 would put China number 3 at about USD3.63 trillion now.

The expectation is that the Euro will be weakening again over the next few months to 10.6 or so.

Something to keep an eye on is the Taiwanese presidential elections for March 22, 2008 I have predicted that Ma Ying-jeou of the KMT will win. The KMT landslide legislative victory and most of the polls suggest that this is a safe prediction The main difference with a KMT victory would be direct airplane flights between China and Taiwan and pretty much unrestricted investment from Taiwan into China. It should also mean greatly reduced political and military tensions over Taiwan and China with the likely prospect of some kind of peace and unification talks at some point in the near future. Positive results there seem likely to help the long term economic outlook for both Taiwan and China.

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