China Will Follow It’s Own Path
Chinese Prime Minister Mr. Wen Jiabao delivered a pretty straight forward answer on the U.S. led calls for a yuan appreciation. China official stance is:
- Yuan is not undervalued; the calls for a Yuan appreciation are clear protectionist acts – they plan to support China export led growth;
- China is concerned about its U.S. dollar denominated assets – a warning to the U.S. that if U.S. ceases to buy Chinese goods that China will cease to buy U.S. debt;
- The inflation is a major concern – a clear commitment to fight the inflation, as I already said the interest rate increase is imminent in my opinion.
The wording of the speeches was pretty non diplomatic. For me the possible U.S. trade restrictions to Chinese goods coupled with higher Chinese interest rates are a pretty negative for global economic growth, equities and especially commodities.
Bloomberg story: Wen Rebuffs Yuan Calls, Is ‘Worried’ About Dollar
Bloomberg story: China Higher-Than-Expected CPI Hasn’t Altered Policy
Reuters story: China’s Wen says U.S. responsible for bad ties
And Chinese firms are continuing with the purchase of foreign energy assets, a clear sign that they strongly believe in strength and growth of their economy.
Bloomberg story: Cnooc to Buy Half of Argentina’s Bridas for $3.1 Bln