China Rising

The Chinese push back to strengthening the Yuan has been surprising. Granted they are doing what any economic power has been doing for eons – that is doing what is in their best interest. Keeping the Yuan low benefits their manufacturers with competitive labor costs and keeps people more or less employed . But the central bankers have done this at the expense of the purchasing power of the average Chinese citizen. The economic reward, if you will, of a successful economy  is that your currency rises against your largest trading partner. The Chinese central bankers have been distorting this phenomena and thereby penalizing the very people they are trying to help. The second order effect of a rising currency is lower input costs for your manufacturers – therefore keeping margins intact. By allowing the Yuan to rise, it also increases the Chinese consumer purchasing power.Bottomline: coupled with the rising middle class look for exports to China to boost domestic and international sales. Don’t discount Chinese stocks – long term still a power house!


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