The answer is: China is a currency manipulator. What’s the question? Sometimes it seems the conclusions that people like to draw are the same, regardless of what the intelligence says. And so it is, or at least this is what we reckon, that China gets hammered whatever it does.

You may have heard this one before, but apparently some countries in the Eurozone are struggling to raise the necessary monies they need. Keep this one quiet, we certainly don’t want to create a panic, but it appears that when Portugal went to the bond markets this week in an attempt to raise some more readies, some feared it wouldn’t be successful.

Then yesterday, Spain and Italy were busy selling bonds, and once again (shhh) one or two investors had their doubts.

But fear not. Just as some feared Spain was on the verge of holding out the begging bowl and asking the IMF/EU/ECB to put their hands in their pockets and lend it money that they couldn’t comfortably afford, along came China and asked: “Can we help?”

Good old China. Out of the kindness of its politicians’ hearts it offered to save Spain from the abyss.

But now an EU politician has only come along and said China may have an ulterior motive.

The cynical politician was Herman Van Rompuy, no less; Europe’s president. He said: “When they buy euros, the euro becomes stronger and their currency a little bit weaker. That is not neutral in regard to their competitive position. But I go no further in this topic. It could be too delicate.”

Shock, scandal! China has a selfish reason for trying to help Spain. And there was silly old us thinking China was just a country of philanthropists.

Anyway, some are now suggesting the offer to Spain is just another attempt by China to prop up the yuan. You see, if the euro collapses, the yuan will look expensive.

Well, call us naive if you wish, but is it not the case that a collapse in the euro, leading to a possible European-wide debt default, will be bad news for a lot more countries besides China? In the long term such a collapse could be a good thing, but in the short term, well, just thinking about the ramifications brings back memories of the collapse of Lehman Brothers.

We kind of thought that China’s rationale for offering to assist Spain was precisely because she felt it was in her interests to avoid a new economic meltdown in what is perhaps her most important export market. Or are we being a tad indelicate? 

 

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