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neon tetra

China Exporting Deflation

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By forcing down the Yuan: http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100027105/suspicion-grows-that-china-is-exporting-deflation-worldwide-by-driving-down-yuan/

I am slightly blurry on the theory of this. Am I right that it will make Chinese imports cheaper for us, so prices will fall. And demand for Chinese goods will go up, this shielding them from inflation.

Is that about right? My A-Level Economics knowledge is creaking a bit...

What can other countries do? The blog talks about the ECB talking down the Euro. What can the UK do? London's property market teetering would help devalue our currency?

[cards on the table: I've taken a job in China, and I've seen my pay in GBP drop by a good 5% already...]

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This is all about competitive devaluations to chase dwindling demand- yet the solutions proposed all seem to suggest that the way out is to become 'more competitive' , which is code for lower labor costs or less workers due to more efficiency.

So the solution to lower demand is to cut workers and/or wages? Won't this lead to even lower demand?

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