This post should go under the tag of “thinking out loud.” I don’t have anything to base this on besides my sense of skepticism, but it seems to me that China’s “surprise” move on its currency peg is just a little too convenient. I’m just not buying it.
Most commentary seems to think the move stems from either one of two motivations: the Chinese are trying to squelch any criticisms at this week’s G20 meeting, or the Chinese are doing their big to alleviate the global imbalances between countries like China that are sitting on mountains of cash and countries like the U.S. that are sitting on mountains of debt. Either one, either way, generally assumes an almost benign enlightenment from the Chinese.
But what if it’s neither of those? What if something else is driving the Chinese? I’m no China expert, so I must once again emphasize that I am speculating. But what if something internal is driving the Chinese? What if it has nothing to do with the G20 or global imbalances? What if the Chinese are worried about the potential for a deflationary spiral in Europe, a big market for Chinese products, at the same time as their work force is getting more vocal? China’s had a couple of high profile strikes recently at auto plants, and of course the horrible tragedy of all those suicides at that Foxconn plant.
What is the yuan move had more to do with domestic issues than international issues?
I don’t have an answer, I’m just trying to get a thought out here. The China story just never sits right with me. I have a hard taking statements at face value from a totalitarian leadership. So when it appears the Chinese just want to play nice with everybody else, I wonder what it is they’re not telling us.