No. of Recommendations: 1
Jim, here are a few comments -- mostly confirmations -- about your good post. Oh. When I'm done here, I'll give you a recommend.

1. The WTO can lean, but not force. China is insisting that they will NOT float the yuan. The subject comes up almost every other day on the web site. This is a great site to look at daily. I'll repeat, I think it is the most government aligned of the e-news sites, but it is also the best. And, it is not entirely bad to get the gov't slant on things -- as long as you understand the parameters.
I think if China can keep its head, and not let its economy get overheated, the yuan will be able to hold its own.

2. Yes, the biggest problem is people and jobs, plus the growing disparity between the growing middle-class and the poor. China claims an unemployed figure about the same as the US: 6.5-7.0%. But I wonder about that.

There are a lot of people in China who want to "get theirs", and to heck with the poor. The further you move from the coast, the poorer the provinces are. Guangdong province (surrounding Hong Kong) is the richest province. Yunnan province, just two provinces to the west, one of the poorest. BUT they are starting to present themselves as a tourist attraction, and it is catching on! So there is more than one way to bring money into an area.

3. If China is smart, and I think in many ways they are, they will learn much from the collapse of Japan. It is not every place where just across the water you have a WHAT-NOT-TO-DO example in vivid detail.
Japan's goal was to be the world's largest economy by 2000. In 1988, it looked like they might make it. But they bit off more than they could chew -- particularly the banks -- and they have not recovered yet.
Jim portrays their ups and downs (and downs and downs) very well.

China has TWO goals. To become the largest economy in the world by 2040, and to not duplicate the errors of Japan. They have many things in their favor over Japan: 10 times the population, and 25 times the land area (not crunched together with zillion dollar real estate). The country is starting to unify around this goal of 2040.

4. The U.S. does not have its act together perfectly financially. Not by a long shot! Perhaps if they did, the yuan might more likely be devalued downward (another alternative to floating). But until the US establishes a lean financial program, I think the Chinese will not have to worry.


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