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Yoshida in China: Taiwan-China superpower?
Junko Yoshida
8/10/2012 10:15 AM EDT
Expect further investment from China to Taiwan. Fully energized cross-strait business deals between Taiwanese and Chinese companies will be emerging on the horizon.
China and Taiwan signed Thursday (August 9th) their first investor-protection agreement – paving a way to strengthen Taiwan’s relationship with China.
The agreement is designed to address Taiwan’s concerns about resolving business disputes in China, and questions about their rights if detained there.
Is this a big deal? The answer is a resounding yes.
This signals an important progress in long-running trade talks between the two governments. We all know that while China is Taiwan’s biggest trade partner, China is also Taiwan’s political adversary. An agreement like this, however, can put the relationship on a more forward-looking trajectory.
This could also lead to more M&A. Chinese companies are already looking to buy intellectual property and gain manufacturing knowhow from Taiwan companies.
Once teamed up with Taiwanese, imagine how powerful Chinese vendors in the electronics industry could become.
Chinese export and import growth slowed markedly last month, flashing warning signals in both the domestic and the global economy.
Will Beijing let renminbi fall?
Yet another data point emerged to confirm China’s sluggish economy: China’s trade figures.
China’s exports rose 1 per cent year on year in July, a six-month low and down from an 11.3 per cent pace in June. Imports were up 4.7 per cent, dipping from June’s 6.3 per cent pace. China was left with a $25.1bn surplus, a two-month low.
These developments intensify calls in China for Beijing to take measures to stimulate growth, and to let the Renminbi depreciate further to help prop up China’s export
.
Earlier this week, the China Securities Journal, an influential state newspaper, wrote that China needed a weaker currency to compensate for deterioration in the global economy.
The Financial Times sees this “one of the strongest signals yet that China is willing to do what forex markets have been signaling for months: let the Yuan fall against the US dollar.”
Renminbi appreciates against U.S. dollars over the last two years
Fluctuating renminbi against U.S. dollars over the last 12 months
Of course, it’s almost certain that if Beijing let the renminbi fall more steeply against the dollar, a political dispute between the U.S. and China wouldn’t come far behind.
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xingfenzhen
8/10/2012 11:52 AM EDT
Actually the chart titled "Falling renminbi against U.S. dollars over the last two years" actually shows rising RMB vs. USD. The 6 point something figure shows amount of RMB a dollar you theoretically can buy if you are a big bank. (you milleage will vary at money exchanges in malls and airports). Thus a falling rate of USD/RMB illurstrates a rising RMB or Falling USD. You can resolve that question by looking the dollar index, (http://www.bloomberg.com/quote/DXY:IND), which shows that USD is raising against world currencys (thanks to Euro crisis). Thus, in the past two years, Renminbi has been rising not falling over the last two years.
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junko.yoshida
8/10/2012 1:15 PM EDT
Thanks for correcting therror. It was my bad. The caption for the chart is now corrected.
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xingfenzhen
8/10/2012 12:10 PM EDT
And to keep things in perspective:
China / U.S. Foreign Exchange Rate 1980-present. Note, the currency is denoted in USD/RMB, just like the graph in the article. So a rise in the graph shows depreciating RMB. Also note, in 1980 the monthly wage for electrical engineer in China 35 yuan and rent for a 80 sq. meter apartment is 5 yuan a month.
http://research.stlouisfed.org/fred2/series/DEXCHUS?cid=282
And the big picture view:
USD has fallen overall against world's major currencies since it come off the gold standard in 1973. (Note it's steep rise in the 1980s and steep fall in 2000s)
http://research.stlouisfed.org/fred2/series/TWEXM?cid=105
However, it gains substantially against worlds currencies since the 1980s.
http://research.stlouisfed.org/fred2/series/TWEXBMTH?cid=105
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Bert22306
8/10/2012 3:40 PM EDT
I watched a fascinating program about Chinese manufacturing in the wee hours this morning, on France 24 (24 hour news network). They featured a textile factory where the workers worked 10-hour days, 6 days a week, and made $50 a month. The workers lived in apartments that they shared with multiple adults, for $5 a month rent for each resident.
But the main point of the piece was that a labor movements is growing in China, which is already changing that equation. As a result of this, the news piece said, China is investing in places such as Vietnam and Cambodia, to move their manufacturing.
I thought this was fascinating, because I had previously believed it was going to take longer for this to happen. Appraently, the shift is in its embryonic stages already.
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hm
8/10/2012 8:15 PM EDT
Will China and Taiwan also unite in Military space? It will be interesting to see US response.
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Barry Liu
8/11/2012 12:23 PM EDT
Two losers can not make one winner. The treaty is fundamentally flawed,because it is a product of a extremely unpopular regime forging a crony capitalism with its equally unpopular surrogate regime.
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sprite0022
8/13/2012 2:54 AM EDT
as most japaneses already know, no need to panic for japanese folks, they can all switch to automobile bussiness.
it ll take a while b4 chinese /tw combo learn how to make attractive 4 wheels.
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resistion
8/14/2012 3:35 AM EDT
China actually has a smooth relationship with Korea, which is problematic for Taiwan as an outside player.
http://m.koreaherald.com/view.htm?20120813001413
I think Taiwan would be hard pressed to support China's development while also fearing China is supplying the competitor(Korea)'s market.
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