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People's Daily Online>>China Business

Outflow domestic, not foreign

By Yi Xianrong (China Daily)

09:40, December 26, 2011

Government should make due preparations to deal with the betting by some hedge funds on the yuan's depreciation

The recent decline of the yuan's exchange rate against the US dollar, together with the negative growth of China's funds outstanding for foreign exchange, has sparked market concerns over the "retreat" of international capital from the country.

However, further evidence is needed before jumping to the conclusion that "hot money" is accelerating its exit from China. Whether the decline of the country's funds outstanding for foreign exchange is caused by the exit of foreign capital or by the outflow of domestic capital is yet to be confirmed.

The depreciation of the yuan against the US dollar does not mean the fundamental reversal of its exchange rate or its full depreciation against the greenback following the appreciating tendency in the years since China launched reforms of the yuan's exchange rate. Due to the lack of its free conversion to other currencies, setting a reasonable equilibrium price for the yuan remains a particularly challenging task for the Chinese government, especially under the US dollar-led international monetary system. But it will be determined to maintain the stability of the yuan's exchange rate to protect the country's national interests.

In the context of the gloomy international economic prospects, China's economic downturn and its increased risks in the time ahead, some international investors are pessimistic about China's prospects. But whether China's economic development will be according to these expectations remains to be seen. It is reminiscent of the prophesy of "China's economic collapse" following the eruption of the Asian financial crisis in 1997. However, there is no escaping the fact that China experienced remarkable economic prosperity after that crisis rather than a collapse.

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Chinese government at 2011-12-2676.124.224.*
What did our inexperienced government get by adjusting Yuan"s value to suit the demand of U.S?Beijing STUPID MOVE OF BOWING TO U.S DEMAND caused China our economy to slow down while U.S is improving. The export is slowing down significantly which means Chines exports are expensive abroad, due to revaluation of Yuan when the demand is down. Why would American or European buy expensive Chinese goods when their own economies are problematic and money is scarce for foreign consumers? Simply put,why would they buy expensive Chinese goods when they can buy their own cheaper?Simply put again, STUPID BEIJING"S MOVE OF REVALUATION THE YUAN CAUSE CHINESE EXPORTS MORE EXPENSIVE. WITH WAGES RISING HERE IN CHINA, MANUFACTURERS ARE EXITING GOING BACK TO THEIR COUNTRY OF MOVE TO VEITNAM OR INDONESIA.WE NEED LEADERSHIP THAT"S NOT COWARD OF U.S AND WITH ECONOMIC, BUSINESS, FINANCIAL EXPERTISE!

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