...Have been wonderfully entertaining to witness. It seems the media across the world had been busy over the weekend in order to function as the equivalent of a school playground instigator ("hey, did you hear what Bobby said about you?).
In any case, the substantive issue in this verbal game of Chicken that encompasses exchange rates and trade policy is whether or not demand from somewhere, anywhere, can soak up China's huge overcapacity. Since it appears clear that China will not enjoy the kind of trade surplus (either by currency realignment or more aggressive tariffs) it must now engineer demand. Instead, it opted to increase industrial capacity even more in the hopes of outlasting this recession, in effect doubling down on its mercantilist wager. This has a very, very high probability of failure as globalization 3.0 will not be kind to this kind of imbalance. The world has changed and failure to adapt to the new conditions in countries that previously ran huge trade imbalances with China is a mistake.
China's position as a pseudo-crony capitalist state will be exposed with underwriting standards on loans to communist party members (with strict orders to make exportable goods) approaching the level of diligence on sub-prime "liar" loans.
China has much more to lose here. It is unfortunate that the current executive administration does not realize this.
And all of this is happening in a regime only slightly less opaque than its neighbor North Korea. The numbers simply have to be much, much worse than the "official" figures coming out of Beijing would have us believe.
Not a good situation, and I am pleased the world appears to finally be catching up to these issues I have been trying to bring forth to our collective attention for years.
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