Dollar, Game Theory

China Considers Move Away From Dollar

Most market pundits feel that China gets an unfair advantage by undervaluing the yuan against the dollar. This may be so, but I have reservations about them un-coupling it. We could probably sell more to China if they did so, but import prices would rise significantly and could cripple our consumption-based economy.

Eventually, that might be something that just needs to happen, but I don’t particularly want to live through it. And unfortunately, we very well could be moving close to it. According to MarketWatch.com, China is considering a move away from linking the yuan to the dollar. As the Deputy Governor of the Chinese central bank, Hu Xiaolian, said:

Compared with pegging to a single currency, the exchange-rate regime with reference to a basket of currencies will help adjust exports and imports, current account, and balance of payment in a more effective manner.

They still seem to be opposed to a floating exchange rate, but it does appear we’re one step closer to a de-coupling of the yuan and the dollar.

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