TEXT OF INTERVIEW
Steve Chiotakis: China today let its currency, the yuan, grow stronger against the U.S. dollar. Well, at least started doing that. What does it all mean? Marketplace’s Scott Tong is with us live from Shanghai with the latest. Hi Scott.
Scott Tong: Good morning, Steve.
Chiotakis: So Washington has been complaining for awhile that the currency is unfairly low in China. Why the decision now?
Tong: Well the global economy is gradually recovering. I’m sure, Steve, you’re very happy to hear that, and it’s especially good because it comes straight from the Chinese central bank. That’s what it said as it announced what it calls “exchange rate flexibility.” As you know, there has been zero flexibility in currency for the last 18 months. To ride out the global economic storm, what China did is it pegged its currency to the weak U.S. dollar, and that made Chinese exports cheap around the world. But now, crisis mode is over, says economist Stephen Green at Standard Chartered Bank’s office in Shanghai:
Stephen Green: Beijing is happy about the state of the Chinese economy. So the effect of the renminbi exchange rate across markets has been kind of risk-positive. All those trades which benefit from people feeling a little bit happier about the world, taking on a little bit more risk, have benefited from this move.
Chiotakis: Are we going to see an immediate impact from the change, Scott? What’s going to happen today?
Tong: Well today, we have already seen currency rallies and stock rallies. Obviously those are bets on the future. But the actual movement in the exchange rate, most people think it’s going to be a slow motion creep-up. I don’t see anyone recommending you rush out right now to buy low-cost Chinese stuff, so no giant rise expected over the next year, Steve.
Chiotakis: Marketplace’s Asia Correspondent Scott Tong, reporting from Shanghai. Scott, thanks.
Tong: You’re welcome.