China does not make life easy for anyone. During the week only, the RMB 17 per cent of the rise since June (June), when Beijing cut restrictions.
He is now a stronger 2.9 per cent than it was in the summer and going in the wrong direction.
The weakness of the Chinese currency and one of the few things that can unite Republicans and Democrats in Washington.
It is also certain that he is concerned about who is their task increasingly difficult task of managing the other emerging economies China, which is its chief rival.Emerging markets face great difficulty due to rising food prices that reached record levels this week and due to inflation resulting in the same time, they try to stop the massive influx of fast-moving funds from the developed markets.
This dilemma is well known, but left the politicians and central bankers face a choice impossible.Either to maintain the stability of their currencies through the Department of low interest rates, what constitutes an obstacle to the rapid movement of funds, or control the inflation by raising interest rates, which result in slow economies.
Unfortunately, the appropriate policies to stabilize the currency and low inflation rate directly contradict with each other and require investors to follow different methods significantly.
Attempts are under way to avoid this problem of controlling inflation without causing harm exporting countries with strong currencies. It is unlikely that these attempts succeed for long.
I've experimented with Brazil and Chile, two of these options this week. Chile has followed a contemptible way of intervention in the currency, and Akmtha through local bond issues in an attempt to curb the strength of its currency, the peso. Brazil has been more elusive, which damaged the local Bbnokha new rules restricting their ability to sell the dollar short.
Had a direct impact of both approaches is to weaken their currencies. But it is unlikely to work any of the two approaches to stop hot money-consuming, because there are very large amounts of them hurtling to the two countries.
For example, the volume of investments in equity funds involved in the emerging markets $ 3.4 billion in the first week of the year, according to EPFR Global-which is twice the weekly average for the past year.
The investors can see what the politicians see: a very low interest rates, rising currencies and when these prices will rise with them, which bring profit to foreigners.
Map shows how low real interest rates, adjusted for inflation, and there is only Brazil and South Africa among the major emerging economies have a real interest rates high, which is negative in many countries.
Is still the real interest rate in China, even after that brought on Christmas holiday, only 0.46 per cent, the lowest rate since June (June 2008).
There is no reason to expect emerging markets to accept higher interest rates sharply and a strong currency any time soon.
It seems that many of these markets you wish to be a temporary rise in food prices, which allows the rate of inflation to decline without interest rates go up dramatically.
At the same time, they use alternative policies in an attempt to slow down their economies and slowing foreign capital inflows, with raising the interest rate slightly from time to time.
As the Company in Jerome Booth, Ashmore fund management, it must be the policy makers in emerging markets should be aware that their approach is unsustainable.
But does not want any country to be the first to receive the blow by allowing its currency rise significantly, which gives the other emerging markets the opportunity to take a stake in the export market.
China has the solution. If allowed the renminbi to appreciate, it is possible to do the currencies of other emerging economies suit, which relieves the pressure of inflation, and increasing poor people richer, and reduce global imbalances, and help exporters Western defaulters.
It can be a sudden there is an agreement to restore the balance between the currencies in the Group of Twenty meeting to be held in the spring of this year, but failed to summit held in November (November) does not bode well.
Some hope in the possibility of persuading China to open its capital account before the central banks in developing countries, which diversify their reserves away from the dollar, paving the way for the promotion coordinator for the currencies of emerging markets.
But it appeared that none of these two things possible.Outcome is likely in the short term are the worst for investors: more restrictions on capital, and a slow rise in the value of currencies, interest rates are so low is not appropriate, and more bubbles in asset prices.
It is difficult to predict inflation because a large part of the rise in food prices due to poor crops, but there are plenty of signs that core inflation is rising in emerging countries as well.
Will exceed the policy dilemma in the end, these factors only if the errors of policy makers or the crisis of Western new output growth of emerging economies on track.
Investors must decide whether the solution to this dilemma would be to focus on controlling inflation or to stabilize the currency.
This means that the first short-term bonds in local currency or cash are the best bet, while the second will lead to higher inflation and the benefit of the shares of emerging economies.
Whatever way they choose, the investors in emerging markets to observe the policy makers in China very carefully.
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