Chinese Say “Jump”, West Says “How High?”
Yes, China’s got problems:
For one thing, “going Foxconn” in the People’s Republic has become to suicide what “going postal” is to homicidal rage in the U.S. Additionally, after decades of slave wages, workers are clamoring for more, and since there are hundreds of millions of workers, it’s a hell of a clamor. Add currency fluctuations and you’ve got the distinct possibility that China’s no longer the first place companies look to outsource, and China’s exports may no longer be as competitive as those from the new sweatshop nations.
Of course, this hasn’t kept China from quietly flexing its muscles by provoking the world’s financial markets in order to gauge from the reaction just how much clout they’ve got. Back on May 27th I tweeted:
Chinese toying with us-they leak rumor re European bonds yesterday, stocks nosedive. Issue statement to the contrary, market’s up.
To unwrap the tweet, at the time, China intimated that, due to the weakness and disorder in the Eurozone, it was going to severely curtail its future purchases of European bonds, as it didn’t look like collecting interest or even getting its principal back was a sure thing. Western markets immediately swooned.
The next day, as if to correct misconceptions that developed out of thin air, they issued a statement that the rumors floating around were frivolous, unsubstantiated, and simply not true. Western markets breathed a collective sigh of relief and headed higher.
And this past weekend, in a variation on the same theme, the Wall Street Journal sent out a market alert stating that:
Despite a weekend announcement by China’s central bank that it would take steps to increase the flexibility of its currency, the People’s Bank of China Monday set the dollar-yuan parity rate at 6.8275, the same level as Friday.
The move led to a reversal of some early morning market moves. The euro, yen, Australian dollar and Korean won, for example, had all gained against the U.S. dollar, and Asian stock markets were up, with the Nikkei gaining 1.5% early. But the U.S. dollar immediately regained ground against other currencies, and stock markets fell back slightly. The Shanghai Composite index was recently down 0.2% after opening higher.
The Chinese, having written and read The Art of War, have been sending the economic equivalent of probes and scouts into enemy territory to assess their own strength and their adversary’s weakness. The advance men came back smiling, like the cat who’s about to eat the canary.
I guess if someone had loaned me the money I’m living on, I’d tend to hang on their every word as well.
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