QUICK QUESTION: what happens if China revalues the yuan, or the U.S. takes action (e.g., a blanket tariff) which for all intents and purposes serves as a revaluation?
I was just thinking about this today, that's all. But it's interesting and worrisome all at the same time. For instance, what would happen to Wal-Mart? Sure, it could shift some of its supply network to lower-cost locales, but it couldn't shift all of it that quickly, could it? I mean, Wal-Mart spending alone accounts for 1 pc of China's GDP.
And would what happen elsewhere in the U.S.? I mean, if we assume the yuan is about 40 pc undervalued -- it's trading at about eight to one -- we can then assume that a fair value is five to one. Suddenly, all those Chinese goods we've been buying -- from Wal-Mart and everywhere else -- are going to get a lot more expensive awfully quickly.
Which leads to the next question: what would happen in China? If all the big multinationals keep looking for lower costs elsewhere -- and places with those do exist -- then what would that shift elsewhere mean to the world's second-most powerful nation?
I find these questions very disquieting.Posted by Benjamin Kepple at May 22, 2005 09:14 PM | TrackBack