Monday, May 23, 2005
The RMB Bickering - An Economic or Political Issue? or Both?
For the past many a month, one of the 'hottest' topics in the field of international finance has been the value of the Chinese currency; the Ren Min Bi. It is currently pegged to the dollar at 1$/8.28RMB.
Politicians in the United States claim the appreciation of the Ren Min Bi would help the US trade deficit and grant China's neighbors with more investment. China claims the US is motivated by political and not economic reasons for advocating the raising of China's currency regime. The US is finding it challenging to argue for the contrary.
The Economist seems to support the idea of moving away from the pegged currency, but by means of a step-by-step mechanism, with the reliance of a currency basket as the first step away from the peg to the US dollar.
At the end of the day everyone knows that the US is solely to blame for its very poorly managed fiscal policies (with the highest national debt in the history of the world). Is China just being a scapegoat used to distract everyone else from the reality behind the Uncle's Sam's financial mess - or is all this an economic issue? Or both?
These are just a few brief remarks to spark a debate on the issue. Your additions or clarifications are welcome. Please share your thoughts.
Posted by SAP at 10:08 PM