Chinese Currency (RMB) vs. US Dollar
The other day, one of my friends who will travel to China next week sent me a link to a chart. It is the 5-year relationship between Chinese currency and US dollar. I know that Chinese Yuan (RMB) has appreciated quite a bit since the pegging ended in July 2005. I also noticed that recently the exchange rate broke the RMB 7 per dollar milestone. However, I never looked at the course of the change until I got the link.
Well, if you ask me I have to say it’s quite dramatic. However, I am sure many politicians in this country would like to see a curve like this:
That represents an immediate appreciation of 40% that some say that RMB is undervalued, which is also blamed for the loss of manufacture jobs here. I don’t know much about currencies and jobs, but do you really believe a RMB5/dollar can solve the problem that factories in this country are facing?
I don’t think so. If goods from China become more expensive, companies like Wal-Mart will find other suppliers at lower prices and the trade imbalance between China and U.S. will simply shift to other countries.
Update: RMB has rebounded a little bit recently, as shown in the following chart.
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We all know RMB is going appreciate the US dollar. The question is how can we make money from the currency exchange?
Nah, no country can provide as many skilled labors as China. When RMB goes up, companies like Wal-Mart will be forced to stick with China. US consumers will then stick with higher priced imports, LOL!!!
Walmart’s executives don’t talk about the R word or the I word because their view is that there is no recession and inflation doesn’t exist. Also, there will be plenty of suppliers willing to slit their own throats to get Walmart’s business.
Even with the RMB valuation and the increase in labor wages all over China, Walmart’s stance is that everyone needs to drop their prices year over year, or you’re out. Guess what? After Walmart chased away domestic suppliers and even the Chinese suppliers, we’ll be importing from Africa, yes, I said Africa. Made in Zimbabwe will be the next big thing
Sun,
You may be interested in this — just reinforces what you are saying – here is the exchange rate I have been getting in China for the past 8 months.