A currency war is looming with the US threatening to impose punitive tariff mechanisms which may trigger a global trade war, writes Andrew Leung at his weblog. “However, China’s current resource-intensive manufactures are already trading at wafer-thin margins and any drastic RMB appreciation is likely to cause catastrophic job losses and social instability. ”
For China, much more is at stake than economics. She preciously guards her independent exchange and monetary tools to grapple with the multi-faced challenges of social dynamics and geopolitics concomitant with the unchartered course of a rapidly developing, yet transitional economy, now the world’s second largest. With rising social tensions, China is expected to change course during her coming 12 Five Year Plan (2011-15), ushering in a more moderate, higher-quality, more balanced and sustainable development model geared to much higher domestic consumption.
More at Andrew Leung’s weblog.