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Nov. 15: Revaluing the Chinese Yuan — Opportunity or threat?


The World Trade Club's dinner and talk by the purchasing manager of Cummins Engines and a very bright Ball State business professor

When: Tuesday November 15 — registration and social hour 5:30-6:30 Pm; dinner at 6:30

Where: Omni Severin Hotel Downtown 40 W. Jackson Place Indianapolis, IN 46204 (parking at Circle Center Mall)

So here's what I think about the controversy over the value of the Chinese yuan. It's definitely valued less than it would if it was allowed to float, and that is intended to help promote Chinese exports. The situation is similar to Japan in the 1970s and 1980s. By keeping the value of your currency low you make it cheaper for outsiders to buy your stuff while making it more expensive for your own people to buy stuff produced by outsiders. That means Chinese consumers are being penalized so American consumers can buy Chinese-made goods more cheaply. Woo-hoo!

Of course the Chinese government isnt doing this to be generous to Americans. The purpose is to capture global market share for Chinese firms, and to ensure Chinese workers will have jobs. Just like Japan before it. Allowing the yuan to float on the market might help some American companies increasing their exports to China (although it would also spur exports from Europe and Japan and Korea too), and it might lead some American purchasers to consider buying American goods which would be cheaper relative to Chinese products. But it would have nothing to do with global job shifts (China is sucking low-pay jobs not from America but from Mexico and other developing countries). It might even help cool down China's overheated economy. Revaluing the yuan would definitely expose the Chinese economy to new uncertainties and instabilities, and that might not be a good thing for the world economy. Increasing unemployment in China (already one of the biggest worries for the Chinese leaders) could destabilize China's political system. That could be good, Solidarność helped topple communism in Poland. It could be bad, appealing to economically hurting Germans helped Hitler gain support.

My sense is that American leaders who reduce our problems down to improperly valued yuan are trying to divert attention from bigger political and economic problems. No wonder economics makes me nervous.

The World Trade Club's dinner in November should help make sense of this issue. Dennis Kelley has been President of Pacific World Trade in Indianapolis since 1986. Previously, he served as Partner of Alliance for Global Commerce with Governor Robert Orr, Director of China Operations for Cummins Engine Company (1978-1984), and Regional Manager of Middle East for Cummins Engine Company based in Tehran, Iran (1975-1977). In China, Mr. Kelley was responsible for all commercial and legal negotiations for licensing technology and direct sales, set up their Beijing office in 1982, and set up initial distribution system. Mr. Kelley has done several presentations and lectures on China in Yale University, John Hopkins University, Columbia University, Indiana University Business School, American Graduate School of International Management, Chicago Council on Foreign Relations, U.S.-China Business Council in Washington, D.C.

Srinivasan Sundaram is a very bright professor of international finance at the Miller College of Business at Ball State. Ph.D. in finance from University of Cincinnati in 1991. He teaches Corporate Finance and Global Business classes. Srinivasan won the “UniversityTeaching Professor” award in 1994- 1995. Srinivasan has published papers in Financial Management, Financial Analysts Journal and The Journal of Financial Education among others. He serves as the Internship coordinator and the departmental advisor to the Finance & Insurance department in the Miller College.

Event Cost: $30 for World Trade Club members; $40 for non-members; $25 for full-time students
To make a reservation: Tel: 317-261-0918; Fax: 317-888-6152
E-mail WTC Administration

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