Some thoughts on China blasting a Congressional Report

Here is what drives me nuts about international politics and politics in general: there doesn’t seem to be any no real, genuine, honest discussion between parties. Maybe behind closed doors, though there doesn’t seem to be evidence of it. If so, the people of the world are apparently deemed too stupid to handle the truth. Perhaps they are? Regardless, here is another example of blatant hypocrisy and lying.

Just what we suspected: China lied

Well, China reneged on its new floating yuan policy. The AP reported today that China will keep its currency “basically stable and reasonable” just a few weeks after saying it would allow the yuan to float. After the June 21 announcement that “People’s Bank of China has decided to proceed further with reform of the RMB exchange rate regime and to enhance the RMB exchange rate flexibility.” we questioned whether the intent was genuine. Less than three weeks later, it is clear China only made that announcement to deflect discussion of the exchange rate policy at the G-20 meeting.

How much did the renminbi appreciate since June 21? A whopping 0.75%.

China to let Yuan float freely or not?

On Friday, the People’s Bank of China announced that “the People’s Bank of China has decided to proceed further with reform of the RMB exchange rate regime and to enhance the RMB exchange rate flexibility.” On the heals of this announcement, commentators and the media lauded this as progress. After all, the G-20 meeting is coming up in a few weeks and it would have been horribly unpleasant for the Chinese had they not conceded something on currency maniplution (or “managed” as the Chinese prefer to call it).

I couldn’t help but notice that the statement contained absolutely nothing about timing or magnitude. In fact, the statement goes painfully out of its way to say significant adjustment is not necessary:

With the BOP account moving closer to equilibrium, the basis for large-scale appreciation of the RMB exchange rate does not exist.

So there you have it. Frankly, I think this is likely to be “vapor-ware” of sorts. So far, the Yuan has appreciated since the announcement. Let’s see how far it goes and how long it lasts.