Tuesday, March 13, 2007
China and the 1 Trillion Dollars (for starters)
By Walter Burien - http://CAFR1.com
As we all know, first cheap and now high-tech Chinese goods have saturated the US Market for well over a decade now.
This created a very large strain on the balance of trade between the US and China.
Additionally, the Chinese government to keep that imbalance running at full steam kept their currency the Yuan pegged to the dollar so that their currency would maintain at a fixed "low" rate to the dollar and thus their manufactured goods would remain cheap in comparison to US Goods where their currency would not appreciate to the dollar and thus cheaper Chinese products.
The US Government and manufactures here in the US were not happy with China's currency strategy and for the last several years put the pressure on China to stop pegging their currency the Yuan to the dollar and move to a basket of currencies to determine the Yuan's value. Well, after severe pressure exerted by the US Government, about six months ago China buckled and un-pegged the Yuan from the dollar and went to a basket of currencies pegged to the Yuan.
This left China holding about 2.5 trillion dollars now up for investment. Click here for more.