China worries over US$ fall

Wen Jiabao, the Chinese premier, spent his trip to Singapore yesterday expressing concern over the fall in the US$. ‘“We have never been experiencing such big pressure. We are worried about how to preserve the value of our reserves,’ he said.

In a separate interview, Mr Wen then went further, stating ‘We will increase the flexibility of the renminbi exchange rate and gradually achieve its convertibility on the capital account’.

Clearly Mr Wen is amongst those who have woken up to the rules of ‘Beggar my Neighbour’ that I described yesterday, when commenting on currency markets. It will be worth watching closely to see if, and by how much, the renminbi starts to rise in the next few weeks.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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