654. Currency War III Continues with China

A little more insight is provided with this article on how China, after two rate cuts already in a single month, will be following up with additional "fine tuning" to induce more spending. The questions become what should their consumers spend it on and what can be done? As we already know, their labor market salaries are ridiculously low compared to ours. A lot of it is because the companies do NOT offer benefits, such as health and retirement.  This further leads the Chinese to save more, instead of spending, to provide health and retirement protection. A double bladed sword -- very low wages and saving! It's like our welfare people, except they ARE working and helping China improve its production of exports. We learn from the article how both China's exports and imports have decreased. Changing rates to print more money (and devalue the yuan) is supposed to increase exports. However, this also makes imports more expensive. A tough situation. I agree with the article that the only solution is a long term solution. Unfortunately, the article ended short and gave no hints to the solution other than "fine tuning" is necessary. I would assume Chinese need to consume more of their products with their yuan -- they do not need more dollars inflating them; this is caused by us lowering our rates (printing more virtual dollars) and flooding their market with U.S. products (or Europe and England with theirs now that they are fighting to win the lowest rate war). I can only see raising wages and benefits being a solution in China. Now, will this ever happen? I doubt it. They can't just print more money (devalues yuan) to pay higher wages! It will have to be that the corporations need to make less profit to pay higher wages. Oh, right, the government holds the high stakes in all the corporations! The greed of the government needs to cease and democracy needs to prevail before we'll see China turn the corner. They climbed out to the last leaf on the branch -- CHECK! Can we expect the selling of assets and ownership and the beginning of a privatization movement? Let's watch.