China signals a rise in yuan value against dollar

Mitchell Hartman Jun 21, 2010
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China signals a rise in yuan value against dollar

Mitchell Hartman Jun 21, 2010
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TEXT OF INTERVIEW

Bill Radke: China said over the weekend its currency’s going to start rising in value against the dollar. China’s central bank has been keeping the yuan cheap, but it is indicating that strict policy may be getting more flexible. And here to tell us why this matters to you is Marketplace’s Mitchell Hartman. Good morning, Mitchell.

Mitchell Hartman: Good morning, Bill.

Radke: So first, what do the Chinese mean by this new “flexibility”?

Hartman: China is going to let the yuan fluctuate in a slightly wider band with foreign currencies. Ultimately, it could rise against the U.S. dollar by about 2 [percent] to 5 percent this year and in coming years.

Radke: And is this in response to the pressure we’ve heard about coming from the U.S.?

Hartman: Well, yes, in part. But — there’s a big but — China says this won’t be a big, one-time appreciation to get the yuan more in line with the actual strength of the Chinese economy on the world stage. They say it may not even need to go up much at all. And because the Chinese are sort of hedging and hawing like this, critics like New York Senator Charles Shumer say this is really no change at all in Chinese policy — he’ll continue to try to pass legislation against China.

Radke: Still, if it rises a few percent a year against the dollar, that could make a difference to American companies, right?

Hartman: Well sure, and Europeans as well — anyone who wants to export more to China. Chinese consumers will get more for their money when they buy everything from a Coke and a Big Mac to the Intel processor that’s in their laptop. So winners could be companies like Cisco, KFC, Caterpillar, Apple, Motorola. Of course, there are also losers: Wal-Mart, Target. They sell a lot cheap clothes made in China and those will get a little more expensive.

Radke: Marketplace’s Mitchell Hartman. Thank you.

Hartman: You’re welcome.

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