Tracing The History Of China's Forex Reserves And Trade Balance
Today Bloomberg picks up where we left off yesterday, and in its "chart of the day" analyzes the underpinnings of Albert Edwards' assumption that not only will the Renminbi not increase in value, as so many battered manufacturers in the US hope and pray (and complain to Congress every day), but will in fact be further devalued once China realizes the only way to avoid America's fate down the financial rabbit hole is to unpeg, but in the opposite direction from where Geithner would like. The causal factor: a collapsing trade balance which drags China's forex reserves, resulting in a major shift in international capital flows.
In either case, here is what Bloomberg had to say:
As the CHART OF THE DAY illustrates, Chinese exports have exceeded imports every month since May 2004. During the period, foreign-exchange reserves jumped fivefold to $2.27 trillion as of September, the most recent month available.
In light of this chart, have fun convincing China to inflate the yuan. Also, consider rereading the Edwards piece, as it may be the best approximation of what happens in 2010 not only in terms of China's trade balance, but its trade balance, and by implication, China's capital flows. And the second they divert away from the US and refocus on its own economy, it would mark the end of the Chairman's liquification strategy.