Andy Xie says yuan is overvalued

In an article about China's problems with the real estate sector, Andy Xie says an undervalued currency is not one of China's problems. In fact, the renminbi may be overvalued.

China has many problems, but an undervalued exchange rate isn’t one of them: The renminbi may even be overvalued. The pressure to appreciate comes from market speculation about what the U.S. may do to China. China’s money supply has increased four and half times in a decade. I don’t recall any economy that, after such prolonged and massive monetary expansion, didn’t suffer devaluation. When we see a reverse in the expectation that the renminbi will appreciate, the capital outflow could be massive. That will be China’s true test — not today’s pressure to appreciate.

English link.

The English link translates some of the Chinese, but it is mostly about currency, where as the Chinese article is about globalization and a real estate bubble. Here Andy Xie has the trend right, but since he's not looking at social mood, his timing may be a bit optimistic. Below is the sloppy Google translation along with the Chinese:
While the trade war is unlikely now, the next few years, Sino-US trade frictions may increase. A commodity-specific protective measures will proliferate. Chinese enterprises will become increasingly difficult for independent development in the United States sell their products. In essence, the Sino-US trade will become increasingly concentrated in the United States multinationals. Obviously, this is not good news for Chinese companies because these companies eager to establish their own brand, or establish their own distribution channels in the United States. China might react to restrict U.S. multinationals in China business. Although the bilateral trade will continue to develop, but growth will slow sharply. I suspect that in the next decade, the pace of development of bilateral trade may be less than half of the past.

  Sino-US trade friction signs that global trade will slow down. This may be a good thing. Over the past 20 years, as multinational companies will shift production to developing countries, global trade growth rate is the world's economic growth rate of 2 times. Most of the production have been completed to transfer the transfer. The remaining production is difficult due to the transfer of political interference. Future global trade in goods may be synchronized with the global economic growth.

  For a long time, globalization has both the developed and developing countries is a win-win. But we have no such feeling. Developed over the years to enjoy cheap goods, since the unemployment, the income of the developed countries face the problem of suffering. Developed countries, the future looks worse.



With regards to real estate, Xie sees a collapse in real estate prices, by as much as 70-90%. China will have to raise interest rates soon, he says, but if property prices decline, the hot money will flow out of the property sector. Although Xie doesn't represent the thinking of the Chinese government and regulators (though there are some similarities), he does offer a China-centric view of the Chinese economy. The U.S. press, including Nobel Prize winning economist Paul Krugman, tend to look at China as if it was just a manufacturing hub.

Also interesting is how all this plays into the views of Liu Jun Luo and Song Hongbing, of the U.S. using its currency (along with other tools) to retain its position as the number one economy. Liu has predicted that the renminbi could collapse, along with all the other currencies of the world, to as low as 20 to $1.

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