China's Devaluation - What will happen?

1. Currency War - with countries doing a race to the bottom. Vietnam, Japan, and others seem to be following China. China is calling the devaluation a "Convenient Reform" The first day was 2%, and currently it's 4.65, back to 2011 July levels. ZeroHedge is warning of a Current War. Vietnam devalued it's currency, as has Japan.
   
2. China had tied their currency to the US Dollar, which had become too strong and this was hurting exports to areas with weaker currencies, such as the Euro zone.
   
3. China will devalue their currency more.
   
4. The US is not going to increase interest rates from basically Zero, or will only be doing a symbolic amount.
   
5. China's leadership needs continued strong growth in China's economy, and they believe the only way is through exports.
   
6. The Fed Reserve will probably start QE again. China seems to be selling US bonds. The US has little influence they are willing to use for influencing China. China wants the Yuan to become a reserve currency, so this may moderate the devaluation.
   
7. China will probably emphasize even more of a buy China made goods campaign
   
8. Luxury Goods for US & European sales to China will suffer.
   
9. China's economy is worse than the official figures from China. The question is how much worse. The contract between the Chinese government and people, is growth will be high. In exchange, the Chinese people support the government. The historical term for this is Heaven's Mandate.
   
10. China's gold reserves are higher than the official numbers.

Labels: china economy, Chinese Economics