PREGUNTAVER

Are Chinese officials reading my blog? Hehehe..! Just daydreaming. Anyway, as an update to my previous post, the Chinese monetary officials have agreed to let the Yuan's value rise or fall by as much as 0.5%. The previous limit was 0.3%. The move was way below what this site advocates. However, it cannot be denied that it is a positive move towards lesser intervention. Let's hope that China increases the allowable limit soon. It will surely be good for everybody. "China's central bank said Friday that it will widen the yuan's daily trading band against the dollar to 0.5 percent, just days ahead of a key meeting with the United States to discuss trade issues such as the value of China's currency. The People's Bank of China also said on its Web site that it will raise both deposit and lending rates, as well as the proportion of deposits that banks must hold in reserve. ...

American lawmakers are raising serious questions regarding China's alleged currency control measures. According to a CNN.com article, some US legislators and economists believe that the Yuan is overvalued by as much as 40%, making Chinese products unusually competitive in the export market. A deliberate move to restrict the appreciation of a currency's value is currently viewed as a form of export subsidy and some believe that it has greatly contributed to the huge volume of Chinese exports to the US. At this point, there exists a huge trade deficit between China and the US, with the latter on the losing end by as much as US$233 (2006). This column believes in minimal government action as the best way of running an economy. The Chinese government can best support its citizens by minimizing its intervention in the currency trade. If the currency's value is allowed to fall freely, uncompetitive companies will lose in the export market and die a natural death. Sad it may ...

A newspaper headline (today) reports that the Philippine currency is gaining way too fast. What does this mean? In economics, we were taught that a currency devaluation is not neccessarily bad. Devaluation encourages exports and discourages importations. For the Philippines, the peso has been on a constant decline for a long time and since a lot of consumer items are import dependent, consumers have been complaining about the reduction of their purchasing power. Since 2006, the currency started to appreciate and now, exporters are being largely hit. Their costs are in peso and the export prices are dollar denominated. The appreciation of the peso have suddenly made them uncompetitive. In order to compete, they are forced to sacrifice by reducing their prices but their problem continues. Every decrease in their selling prices are being overtaken be a fast appreciating peso. Its a a tough scenario for this businessmen. However, my stand is for the government to let the peso find its t...