Author: doberman

1 $ = 2.08 RMB -the newest Rate of Exchange [Copy link] 中文

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Post time 2006-4-3 17:09:30 |Display all floors

Reply #8 greendragon's post

Thank you Greenddragon. Not only for what you wrote, but also for your boldness.
I feel that you feel the subject.:) I agree with you.

I just put an image , that an exchange rate in countries ,where full free money flow and market value of their money is seriously limited, deforms the PPP from 1 up. To artificially boost the export.

You see , I wrote about RMB and China in my first post for few reasons. If I wrote about polish zloty or, or ukrainian hrywna it would definitelly reduce chances for any replies to zero. Who gives a flight about such countries. Plus - this is Chinese Economy section, not other's economy.

Not longer ago than yesterday I read again in this forum ,the PPP factor being used to adjust the image of some statistical data, where raw figures could be misguiding. I always agree with this. An example: Person A writes that the total amount of money directed to medical care in China is XYZ. THen he divides it by 1.3 bilion and comes out with the medical care per head. In usd. Such figure looks terribly low , when read by Americans for example. Then a person B adjusts this and says " you cannot look at the figure in dollars , you need to realize , that for this money they can buy 4 times more medicines and and other stuff. This XYZ you need to quadruplate to get a real image".

I agree with such ammendments, for the PPP will sharpen the image closer to reality. It doesn't mean that PPP is a magic factor explaining everything 100%. Because , if part of the money is used to buy FOREIGN medicines and FOREIGN apparatuses/medical equipment , then PPP should  not apply to this part of costs. Usually person B will not devagate on such details.:)

Another example. Discussion is going on about Chinese spending on military. Total figure spent is FGH( in USD, or RMB with 8:1 calculation gear). Person B will say "look how much nothing it is comparing with the USA! ".
It somehow happens that in this moment  Person B miraculously "forgets" about PPP. On the other side, person A "recalls" this PPP=4 factor and says " In the real meaning it will be 4 times more than in usd, we need to use PPP to get a good image on the speed of reinforcing the army".
You cannot desagree with this , once we accepted the PPP in other branches, can you. Of course Person A will also not penetrate the details of purchasing costs of arcrafts , ships, radars from foreign countries ( that is , when PPP will not work) for about same reason (only 180 degree U turned) ,as person B did not make it in the medicine zone.

I know that there are quite a few people here, who have a good grip on the skills of joggling economical data and connecting feet with bonds, (no I am not talking about bonding feet), real estates with inflation with deflation with balances with hedges with commodities and with what not.

And there is silence about PPP and what it does.

I have a feeling , that Fish might have been somehow right in one point - freedom of speech problem. Not necessary meaning any administrative nets/traps leading to jails. I am thinking about something else.

Nowadays we see the import/export tensions between China and Europe and China and USA. Two biggest markets are happy with Chinese products for their better value/price ratio , but the producers there and the laid of fpeople are not necessary that happy. Nobody with any mental fitness will dictate China how to set the RoE, but such thingies like import tax and quotas are in the hands of those countries , not China.  It is a hypocrisy to agree with full and sole right to make decision here and attack the right to make a sole decision there. Isn't it? It is understood that any decision, be it in China or in other countries will have it's impact both good and bad, whatever the decision would be. There is no doubt , that Chinese gvmnt is primarly responsible for the good of China and Chinese economy. At least I do not have such doubt.
Does anybody think that other governments are not responsible for the good of their countries?

This is why  part of the people ,who know the subject do not want to post their thoughts since they would only have two options:
1.lie or twist seen as "hanjian".

However, however, I can not exclude the third opition, that as a no-no in economics I mixed everything and somebody will show me that it is not like I think.

[ Last edited by doberman at 2006-4-3 05:22 PM ]
Andy Dob

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Post time 2006-4-4 09:32:14 |Display all floors

I can help

Florida - 1 big Mac (No fries) = $2.35


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Post time 2006-4-4 09:52:03 |Display all floors
Thanks for your questions!!  The RoE issue is hot between China and the U.S.
I don't think the  Purchase Power Parity Law is suitable to make judgement.  Of course,
Chinese labor force is cheap enough to build an advantage. But think about what consists
of Chinese imports. You'll find most of the imports are primary products, not high-tech products.
So far, there are restrictions of capita flow-in and flow-out. So comodites trade show importance
in the external balance of China. What I want to say  is that China's low salary and cheap comodity
can represent the  whole nation. China is still an developing country, China has a different production
structure with the US. Life-related products are advatages of China, it's stupid to compare your advatage
with your rival's diavatage.

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Post time 2006-4-4 11:51:15 |Display all floors

eh! what's up Mr. Fish....

In Malaya super center....BIg Mac cost RM2.80....i think?

i'll go buy a big mac this afternoon and tell you for certain tommorow...
i don't like to eat Big much synthetic ingredients.....
so..bad taste...

ha ha ha

Green Dragon

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Post time 2006-4-4 15:39:07 |Display all floors
Andy, this is an interesting question.

To begin with, I tell you my calculation – you will never know.

Almost everyone can find many good reasons to support whatever rate he believes from 1:1 to 10:1.

When people look at China from his certain background, for example, from a developed European country, he would likely think, oh, buying a bowl of noodle in China costs 5RMB, and it costs US$5 in the states, so the rate 1:1.

Good reasoning? Yes, why not?

The other guy can also argue that it costs 200,000 RMB for a Chinese to buy a car, and the same car only costs US$20,000 in the states. So the rate is 10:1.

Good reasoning? Yes, why not?

The China economy is still a mixture of many sorts of economies, including some very old ones such as farming by hands and donkeys; many type of industries such as shoes making, steel mills; also some high techs such as computer chips making, R&D.

That is why in every single economy in China, the salary is all low. A good computer scientist, will be paid half million US$ per year, but in China, he will be only paid less than half million RMB. However, half million RMBs in China can make his life better than half million US$ in the US.

When you comparing a developed European country to China, you are comparing to (1) very old industries such as farming by hands and donkeys, also comparing to (2) some other industries which are dying in developed counties such as shoes making and steel mills, also comparing to (3) high tech industries.

Comparing to the 3, will result 3 type of totally different exchange rates, which one is correct? Probably none of the 3 is correct. Then what is the correct? Only god knows.

If I have to pick a rate, I pick 1:1 – my Chinese money will not shrink 8 fcuking times in this way.

BTW, according to my wife, she beieves the rate is 1:1, because when she buys grocery in the US, she found 1US$ buys the same thing that will cost you 1 RMB in China.

[ Last edited by luf2004 at 2006-4-4 04:18 PM ]

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Post time 2006-4-4 18:19:03 |Display all floors

Doberman has been caught with his pants down

But I won't post this picture.

Emu, Fish and GreenDragon, all of them beaing a coalition of bad will of Birds, Fish and Reptiles have cought me, the Mammal in the McQuack Maze.

I read the data coming from the world about the oversized sandwich designed for the mouth of the crocodile or other hippopotamus and the stomach of an Ostrich, and I just realized ,that...I do not know where is any Double Huang Shan symbolizing Polish car mechanic  at work  in my neighbourhood?!

I do not know how many colour full papers , and of which dominant hue, are needed to exchange it for this industrial substitute of food in Poland! This will probably drive the last nail to my coffin and prove beyond any doubt that I have no clue about economics. I will have to move whole net of spies to get this data.

BTW Green Dragon, how much is RM in the real money?

[edit - these, who regularly peep into the Cave of Vampires called United Tombs of Transylvania know what I mean by Polish car mechanic , for the others I attach the learning material]

[ Last edited by doberman at 2006-4-4 06:24 PM ]
Andy Dob

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Post time 2006-4-4 18:29:57 |Display all floors

Hi Luf

Thanks for your ignorant input to the thread of ignorants set up by the head ignorant - that is me.

So you say in relation to the USA the PPP is 1:8 (?) . that is RoE to be 1:1.
But why then people always use something between 1:4 and 1:4.5 when adjusting the RMB/USD statistical figures? I have seen this factor many times and I have never seen anybody disputing it here!!! Have you?

Surely, the structure of relative prices in every country will be a biit , or two bits different. This is why a big basket of goods and services is used to get a better grip on the real Purchase Power of a worker.  I would like to believe that this was the way to calculate the PPP in China. But which country (or was it a basket of countries to where China exports/imports from, with relevant weigh coefficient relative to their percentage of total export/import of China?) was the relative point of comparison?

Such relative PPP is a table with columns and verses , where we see countries and units of goods/services, and in the crosssections data  = how much time does it required to buy a certain item. Speed of earning is averaged to a country or region.

If I compare PPP in cities (Polish vs Chinese) it would give me something like PPP in China in relation to Poland would be around 2:1. This is an average "interest rate" when I wanted to exschange polish zloty to usd  to RMB and wanted to buy products. I could buy about twice as much if I wanted to buy comparable qualities. In tv sets it would be about 2.5:1 , in cars 1: 1:5 (cars are more expensive in China).

PPP makes these workers in the country of high PPP still work and survive. If Chinese were earning what they do, but prices on themarket were like in Poland , they would dump their work. Changing the Roe in the way to bring PPP near 1:1 in China should not change the relation of earned money to the prices of Chinese products, but foreign goods would become cheaper, and the export would be very problematic.Surely the speed of  China distancing other countries in the sum of the foreign currency reserves would fell . ButChina is now nr1 already. The question is, why the world should do nothing , waiting until there will be no number 2 and no number 3, and the rest will start from number 4.
or 5?

More in my posts I will copy here from the UTT (  United Tombs of Transylvania)

[ Last edited by doberman at 2006-4-4 07:03 PM ]
Andy Dob

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