You are hereBlogs / dlindorff's blog / The dollar doesn't buy as many RMB as it used to, and now nobody even wants it in China

The dollar doesn't buy as many RMB as it used to, and now nobody even wants it in China


By dlindorff - Posted on 28 October 2011

 

By Dave Lindorff

 

Shanghai -- I was talking yesterday with the chief financial officer of a US-based drug firm that operates here in China, producing for the Chinese market, and got an up-close look at how bad things are for what used to be called the Almighty Dollar.  

 

The company in question, a joint venture between a very profitable U.S. drug company and a local Chinese company, is quite profitable itself.

 

The guy was explaining to me that his firm needed to add another factory, because the one they had was running full-tilt and couldn’t keep up with demand. That might sound like a simple problem, and one that most enterprises would be happy to confront, but the shrinking US dollar, and concerns in China about inflation, complicate things.

 

You would think that it would be a simple matter of the parent company’s sending over the $50 million or so that it would cost to build the new plant and that would be that, but it turns out that the dollar is falling so fast against the Renminbi (RMB), the Chinese local currency, that no contractors or other vendors necessary for setting up a new facility are willing to accept it as payment. That means the company has to try and come up with the construction costs in local currency.

 

I won’t go into the arcane machinations that involves, except to say that because Chinese financial authorities and the country’ central bank, the People’s Bank of China (PBOC), aren’t letting local banks or foreign-owned banks with offices in China lend money without going through a tough approval process, the outcome of which is iffy, and they are setting interest rates at 6.5% for those loans they do approve, which is a pretty stiff rate to have to live with.

 

The important point here is that the dollar is being viewed here in China the way people in the U.S. have typically viewed Mexican pesos or Chinese RMB...

 

 

For the rest of this article by DAVE LINDORFF in ThisCantBeHappening!, the new award-winning independent online alternative newspaper, please go to: www.thiscantbehappening.net/node/872

Informed Activist

Support WarIsACrime



Donate.








Tweet your Congress critters here.


Advertise on this site!




Facebook      Twitter





Our Stores:























Movie Memorabilia.



The log-in box below is only for bloggers. Nobody else will be able to log in because we have not figured out how to stop voluminous spam ruining the site. If you would like us to have the resources to figure that out please donate. If you would like to receive occasional emails please sign up. If you would like to be a blogger here please send your resume.
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.
Image CAPTCHA
Enter the characters shown in the image.