Bellerbys Economics - Mr Stephenson

Thursday, December 13, 2007

Buy Renminbi Today - Do it Now!!

For some time, many economists have argued that the renminbi has been undervalued.

Of course, this has produced benefits for China - allowing it's exports to grow rapidly to the point where it is now the industrial engine of the world - and also allowing it to attract massive levels of investement providing growth, jobs and opportunities for its people. The biggest prize of all has been the lifting of 400 million people out of absolute poverty in the last fifteen years alone.

However, just recently this policy has hit some problems - including criticism that China is standing on one leg (exports) and not two legs (exports and domestic consumption). Also the fairly rigid link to the dollar has helped to fuel inflation within the economy - as the dollar fell, the renminbi fell with it, making imports more expensive. Added to this, the increase in domestic consumption in the last year has made inflation worse as at least some of this consumption has been on increasingly expensive imports.

So, suddenly, it looks like the rules of the game may change a little. Zhou Xiaochuan, the chairman of the Chinese Central Bank has said today that he experts a significant increase in the value of the currency very soon as a way of reducing inflation and taking the pressure off interest rates. This is very likely to happen at the end of this week's US-China economic summit - a good time to make it look like the Chinese have been listening carefully to American advice (when in fact it's in the best interests of the Chinese to make the change at this point!). It will help to improve US-Chinese relations.

So this is today's big tip - buy renminbi today!! You can do this through many of the online dealers - here's one at random, but there are many others:

http://www.cbfx.com/

or through your local bank.

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