Lobo's Investment

Just come back from Prof. Mundell's lecture. His lecture on Chinese Macroeconomic Strategies and the International Monetary System is with much insight.

The fixed monetary system is working fine in China. The inflation rate did not go up, the risk towards a flexible monetary system is high and may lead to unperforming loan and bank failure (as Japan happened last decade). If RMB is fixed with Dollar, the other Asian countries will get appreciation pressure for their currencies. Within China, with virtually fixed exchanged rate, the asserts price will go up; how to keep the inflation low and deflat the property bubble would be China government's main task on their table.

My conclusion, in response to US's request on appreciation of RMB, a policy based, deep and effective correction in selected sectors will set the export back. The economic growth will be set back to 5% when it's overdone. If China choose to change the base of RMB, the 20 years long growth may come to an end.