I think right now is probably the strongest point for the dollar. Interest rates are expected to go down again in the US next year and the current overvaluation of the dollar compared to the yuan causes increased Chinese export surpluses. More export surpluses means that the currency should go up unless it's matched by capital outflows. And as the Chinese economy continues to recover, capital outflows will reduce next year
Chinese Economics Thread
- Thread starter Norfolk
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On second thought, I might have misread his question. When I saw "Can yuan go back to 6 vs US dollar in 2024", I automatically mapped the number 6 to the range of 5.50 to 6.49. That'd be quite a long way to go from today's rate of 7.32. If he meant anywhere between 6.00 and 6.99, there is bigger chance.
My theory is China makes an annual trade surplus of anywhere between $400-$800 billion annually. In 2022, the trade surplus was $857 billion, if China decides to throw 70% of the dollar surplus earned in trade in the market to appreciate Yuan, isn't this a viable strategy? Because it would be sustainable as long as China continues to make massive trade surpluses every year. Or is a strong Yuan really not beneficial to the Chinese economy??
It is not a strong Yuan that is beneficial to China's economy. It is a stable Yuan that is. Those hypothetical 400-800B US per year are better put to work in funding cutting edge R&D and industrial advancements.
M
My theory is China doesn't want to appreciate the Yuan so that exports remain strong otherwise there's no explanation why China doesn't use dollars saved from massive trade surpluses every year to appreciate the yuan.
China's U.S dollar holding is going down. The idea of having a strong dollar is good for imports and spending it aboard.
American people back at home will suffer with a strong dollar and high interest rate. 15-20 dollars for a regular meal in US vs 3-4 USD aboard.
It make sense to even buy real estate overseas because the dollar goes alot further.
Actually brad setser did some good analysis on this. China's holdings of ust in general is basically flat.
Would mostly depend on PBOC decisions. At the moment, China is in the process of breaking in and taking over the 2 really lucrative markets of automobiles and semiconductors.
Keeping the yuan stable might be better for the economy. Meaning if US lets theirs appreciate or depreciate, we go with them. But we don't change the current status quo, at least not radically so.
At the pace Chinese autos are exported right now and once China designed GPUs hit it big in the global markets, you do absolutely not want the yuan to be 5-6 to the dollar or even less.