 Consumer prices in China rose for the third month in a row in January. But the 1.5% year-over-year increase was less than the 2.1% increase economists had expected.
 That has led stocks in China to rally for a third day on speculation that lower-than-expected inflation will put off interest rate increases and other policies designed to slow the economy. The consensus of a survey of economists by Bloomberg conducted before the most recent inflation numbers pegged June for an initial interest rate increase.
 No surprise that steel makers, a sector that needs the economy to grow flat to prosper because of rampant overcapacity, and property developers, a sector that needs cheap money, led stocks higher.
 The relatively low inflation reading also increased speculation that China will delay steps to allow its currency to resume its controlled appreciation.
 Beijing put an end to the controlled float of the renminbi, pegging the currency to the U.S. dollar, to protect the country’s exporters during the depths of the global economic crisis. The country has been under increasing pressure lately to let the renminbi appreciate because of complaints from trading partners that the currency is under-valued giving Chinese exporters an unfair advantage.
 One potential window for announcing any change in the peg occurs in late March after the meeting of the National Peoples Congress and before a state visit by China’s leaders to Washington in April. Any announcement, thinking goes, would occur before the state visit so that it would not look like China was responding to U.S. pressure.
 With the new inflation numbers, speculation grants increasing odds to a June window near the June 26 meeting of leaders from the G20 economies in Canada.
southofB:
I did not say that China has the right to manipulate currency. I only said from the debt point of view, China has a lot to lose by revaluating its currency. I am not on the side of China for pegging its currency rate to the US$.
Lolowan,
I don’t follow you. I don’t think there is any blame on either side- China sold tons of goods to US Consumers for dollars, China chose to use the dollars to buy US Bonds (as opposed to shares of Pepsi, or Brazilian Reals or Gold or whatever else China could have purchased). China now holds 2 trillion or so in US Bonds. That is China’s choice.
What does that have to do with China manipulating its currency value at the expense of its trading partners? (primarily at the expense of other third world/impoverished countries that need to export to raise their citizens’ standards of living. Vietnam, Mexico, Thailand, Indonesia, etc.)
You seem to be saying that because China bought US Bonds, that gives China the right to manipulate its currency- to protect its bond holdings.
I hate to keep harping on the same old tune, but if CHina wants to integrate with the world economy and participate in it, it needs to play by the same rules everyone else plays by- at minimium not dumping goods for less than the cost to make them, respecting intellectual property rights- licensing brands and technologies rather than looking the other way when Chinese firms simply counterfeit or outright steal technology- and allowing its currency to float so that it can be bid up by the market at the market’s discretion, rather than having some dictator decide what it’s worth (to the destruction of all other competing economies). That would be a good start.
China owning US Bonds doesn’t buy China a free pass to violate international law, the rights of its competitors or their employees, or the generally accepted (and agreed upon) WTO rules of engagement.
I agree with dmartin11 going forward. However, with trillions of debt that has to be devaluated, the Chinese has a point to be hesitant (to revaluate its currency).
I don’t think there is any blame here, there is only a fact and that is that China is controlling their currency vs the US, for better or for worse. Regardless of blame though, why would the US reset their debt levels because China wants to manipulate their currency? That doesn’t make any sense. That’s like a bank giving you a mortgage reduction just becuase house prices drop. Doesn’t work that way. China will have to accept any consequence, good or bad from manipulating their currency. They get increased exports on the upside, but will have to face that it isn’t a permanent situation.
I suppose the US-China debt is denominated in US$. If Remimbi is revaluated higher, the Chinese would lose on the value of the debt. If US would agree to reset its debt to the same level as before the revaluation, maybe be the Chinese would be more willing to revaluating its currency.
I admire Mr. Jubak, but I think laying all the blame on the Chinese is a bit one-sided.