Wednesday, July 14, 2010

About That Yuan Rise

Half of China's textile firms may risk going bankrupt if the value of the Chinese currency yuan rises 5 percent against the U.S. dollar given the industry's thin profit margins.(1)

China needs to go up the value chain if the yuan continues to rise - which they are doing - but even this would mean exacerbated unemployment in the developed world, or protectionism. The aggregate demand simply isn't there to absorb capacity and lowering wages in the largest markets isn't going to do much for that problem.

1 "China's textile firms may face bankruptcy on yuan appreciation: newspaper" - Xinhuanet

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