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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.

2 comments:

Michael Turton said...

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 KMT got only 60% of the vote, which they always do. The DPP actually recieved its highest vote total ever. If you look at the votes over the last decade, the KMT-Blue vote has not gained a single vote since 1998, whereas the DPP has expanded by 800K votes in the legislative elections over the same period. You can't look at the seats, you have to look at the raw vote. It suggests the opposite -- that the Presidential election will depend on the turnout, and that it will close, just like the last two. My own view is that if turnout exceeds 80% and the number of invalid ballots returns to previous levels, Hsieh will beat Ma. I sure hope so. Ma is a spineless puppet of the party's hidebound anti-democracy leadership, a hopeless pro-China ideologue.

That said, everyone here thinks that Ma will win. That's the CW, which is ordinarily as wrong as can be, but the uncannily accurate election market at Political Uunivesity also has Ma ahead, so I tend to think thereis some merit in that view. The polls are a joke, they have Ma beating Hsieh by 25% or more, which is ridiculous -- they are all put out by pro-Ma papers. The KMT chairman, Wu Po-hsiung, yesterday claimed the party's internal polls have Ma ahead by 10%. This is the first election they've had a serious polling capability. It's hard to say how real that number is. He was making the point that Blues should not stay home because the outcome is foreordained. It might actually be closer than that.

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.

Both men support these policies. On cross-strait issues there is little to choose between them. The main difference is actually domestic; Ma's policy is basically an LDP style debt-driven concrete-laden infrastructure boom. Not that the DPP is a whole lot better. Both parties are stuck with the completely corrupt and concrete-driven local political economy the KMT put together during martial law period.

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.

I hope not. Few here want to see Taiwan annexed to China. There is no need of that to achieve peace. China just needs to grow up, is all, and stop trying to annex a territory that was never part of any Chinese emperor's domain.

Tensions could be reduced any time, simply by China growing up on the Taiwan issue.

Positive results there seem likely to help the long term economic outlook for both Taiwan and China.

That outlook will be positive no matter who is elected. Our economy is booming -- 5.7% growth, #2 exporter to China. At home incomes are stagnant, because the KMT, which controls the legislature, has cut off the flow of public construction funding in a bid to pull incomes down and convince the public that the economy is bad. In a country where the media was balanced they couldn't get away with that....but this is Taiwan.

The belief so widely held here that "opening to China" (when we have $200 billion of investment there already) is a form of cargo cult economics... Taiwan already has access to the China market. What it needs is an overhaul of its educational institutions and further development of high tech sectors, and other things that China opening won't affect one iota.

On the sidebar of my blog I have links to some extensive numerical analyses of the election. Enjoy.

Michael

bw said...

Thanks for details and research Michael.