Monday, January 31, 2011  Real Apprecation In China, One Way or
the Other  Just last week I noted that because of QE2 a real
appreciation in China will occur one way or the other: either
its currency will appreciate faster or its domestic prices will
soar.   The former seems unlikely because of China's commitment
to its export-driven growth strategy.  Consequently, China will
most  likely stay tied to the Fed's QE2 monetary policy via its
crawling peg and continue to allow domestic prices to soar.   I
also mentioned that this real appreciation should contribute to
a rebalancing of the global economy.  As if on cue, the New York
Times reports the following yesterday: HONG KONG — Inflation is
starting to slow China’s mighty export machine, as buyers from
Western multinational companies balk at higher prices and have
cut back their planned spring shipments across the Pacific.
Markups of 20 to 50 percent on products like leather shoes and
polo shirts have sent Western buyers scrambling for alternate
suppliers. B