Export is bread and butter for China so an artifically depressed currency means keeping those factories humming and helping put food on the tables of hundred of millions of low skilled laborors. And it is the fear that a revalued RMB will cost massive job losses that stop the Chinese gov from letting RMB appreciate too much too fast. There are already reports some savvy manufacturers are scouting places like Vietnam where labor cost is even cheaper than China and gradually moving the assembly lines over there.
Now the US is a different story. The US economy is driven mostly by consumption (approx 2/3s). And since the US don’t really make much anymore, it has to import just about everything (how often do you see a Made in the USA label in Walmart?). If the USD continues to decline, it’ll soon take more dollar for you to buy that nice set of wheels made by Toyota, playstation for your kids by Sony, etc etc. For now, companies have been able to resist raising prices by enhancing productivity, but sooner or later, it will have to pass on the increase to you and you’ll have to cut back because there just isn’t enough money to buy everything. Alternatively you speak to your banker about an equity loan and next thing you know you’re swimming in debt. The US savings rate is already negative. How much more negative could it get before the system crumbles ?
