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Xinhua- China’s central bank governor Zhou Xiaochuan indicated last month the current exchange rate policy was part of the country’s stimulus package, and the country would cautiously choose the timing to move from the “special policy” to a “regular policy.”
The general view is for 4-8% appreciation in the currency over one years time. The move will help China control inflation. It would take a 15% move to start significantly lowering the trade deficit with the USA. A more important factor in lowering the trade deficit would be for China to adopt more policies that increase domestic consumption.
China needs several years to make what will be a difficult adjustment toward a more balanced economy, but with high unemployment in the U.S. likely to persist for several more years, it is not clear that the U.S. will be willing to wait.
The United States must move beyond a singular focus on currency to talk about many other factors shaping our trade with China. Two cost distortions on the Chinese side stand out: underpriced borrowing costs for state-related firms; and subsidized research and development costs due to lax intellectual property rights enforcement. That said, the currency move will help, not hurt, and if other emerging markets in Asia follow China’s move — as is expected — our export opportunities will be bolstered notably.
4-10% increases per year will allow China’s manufacturers to adapt and become more efficient while not killing the average or good producers. 4-10% increases per year will be a stimulus to chinese consumers as their earnings will buy more.
China GDP Currency China Year GDP Growth USD-RMB GDP USD USA GDP 2009 32.8 8.0 6.8 5.0 13.9 2010 35.4 10.9 6.6 5.6 14.0 2011 40 9 5.6 7.2 14.2 2012 43 9 5.1 8.6 14.5 2013 47 9 4.7 10.1 14.8 2014 51 9 4.2 12.4 15.2 2015 55 9 3.8 14.8 15.7 2016 60 9 3.5 17.5 16.2 2017 66 8 3.2 20.8 16.6 2018 71 8 3.0 23.9 17.1 2019 77 8 3.0 25.8 17.6 2020 83 8 3.0 27.9 18.2 2021 90 8 3.0 30.1 18.7 2022 97 8 3.0 32.5 19.3 2023 105 8 3.0 35.2 19.9 2024 113 8 3.0 37.9 20.5 2025 122 8 3.0 40.9 21.1
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Brian Wang is a Futurist Thought Leader and a popular Science blogger with 1 million readers per month. His blog Nextbigfuture.com is ranked #1 Science News Blog. It covers many disruptive technology and trends including Space, Robotics, Artificial Intelligence, Medicine, Anti-aging Biotechnology, and Nanotechnology.
Known for identifying cutting edge technologies, he is currently a Co-Founder of a startup and fundraiser for high potential early-stage companies. He is the Head of Research for Allocations for deep technology investments and an Angel Investor at Space Angels.
A frequent speaker at corporations, he has been a TEDx speaker, a Singularity University speaker and guest at numerous interviews for radio and podcasts. He is open to public speaking and advising engagements.