chinese vs US currency

May 19, 2006 2:30 PM

Given the current economic trends, what will happen to the chinese currency when it is no longer pegged to the us currency? That's about it, I am just curious whether people think the chinese currency would gain or lose ground to the dollar if that happened.
posted by batou_ to work & money (6 comments total)

The yuan is currently undervalued. I'm not sure that there's really any disagreement about that.
posted by mr_roboto at 2:32 PM on May 19, 2006

This thread has some interesting thoughts about the subject.
posted by educatedslacker at 4:18 PM on May 19, 2006

Chinese goods will rise in price and Americans will buy fewer of them.

Also, it might encourage Chinese investors to buy more US debt.
posted by bshort at 6:25 PM on May 19, 2006

Most likely, their currency will go way up, and ours will go way down.

As a result, our exports will get cheaper, and theirs will get more expensive. Unfortunately, labor is the biggest cost of business, and even if our dollar drops by half, it's still not going to make our wages competitive with China... not even close. They can pay these people five bucks a DAY. So if our labor costs drop from thirty bucks an hour to fifteen (relatively speaking), and theirs stay at 50 cents an hour... all it does is make Chinese goods a hell of a lot more expensive, without doing much for our exports.

Plus, we don't DO much manufacturing here anymore... we don't have nearly as much to export as we once did. Most of the jobs in the last twenty years have been service-sector... pushing the jello around the plate, instead of making new jello.
posted by Malor at 6:41 PM on May 19, 2006

[fixed question layout]
posted by jessamyn at 4:24 AM on May 20, 2006

Malor pegs it. One reason for the current trade imbalance is that the value of the yuan is held artificially quite low.
posted by enrevanche at 6:16 AM on May 20, 2006