On a side note:
China has a tonne of US dollars which if they converted will unpeg their currency from the US, makes China’s currency rise which in turn makes China less competitive in exports. Could China be buying metals by the likes of Copper because it’s better than holding US dollars? Inflation? If the US domestic consumption is slow to return and China happens to get it's domestic economy increasing strongly "beyond stimulas". The Chinese won't want their Yuan pegged to the USD anymore will they!
I initially sent this as PM to MR but for the record I'll share my unsophisticated thoughts in the open....
Up front, I'm not that economically inclined. I don't really know the ins and outs but I do know how people think and that's what I'm betting on.
China recently made some comments about having the IMF special drawing rights become the reserve currency. I don't know if I see that happening, or certainly not soon, because the USA will take a protectionist policy stance. They won't give up their position lightly.
However, China understands what most of us know - the US dollar has got big problems. They're inflating the crap out of the dollar with the amount of debt they're issuing in order to pump back into the system to try and support their already debt-based economy. We know that can't end well. Debt supporting debt. That's how the current crisis originated. It's beyond credulity to think it will be the solution, yet that's the play of Western govts. It's my belief that the US dollar will eventually lose its reserve status and that's when their chickens will really come home to roost.
I believe that will be informing Chinese policy as they shore up gold reserves, base metals etc in order to deplete their US dollar reserves and have something more tangible backing their wealth reserves.
So I'm just thinking out loud there to say I completely agree with you. China has to wind back their reliance on exports and the safest way for them to do that is to internally provoke consumption demand. How they will do that from a policy perspective I have no idea. But I do know human nature and the way I see it, the Chinese are getting a taste of Western consumerism and they like it. The growing middle class are enjoying their new found 'luxuries', especially those who are children of the revolution that endured a quite spartan lifestyle for decades. They're not going to just sit back and wait for the USA to start filling Chinese coffers again.
Further, unpegging their currency will increase their own foreign purchasing power. What can we expect to result from that? Given they currently have the market cornered on cheap manufacturing what are they likely to want to buy from other countries? Apart from raw materials, I don't know yet but I'll be doing some more thinking on that to look for opportunity. Possibly food. Will some countries basically become farms to feed China? Fertiliser companies to increase farm productivity? Wool for clothing? etc etc. Like I say, I don't know but there is a large domino play here which will prove very lucrative for those who get it right.
I don't know the timeframe this will play out over. I'm not banking on it in the near-term to profit off in the next week, or month or 6 months.
As a side-note, one long-shot that might unfold is America becoming the next China....massive unemployment, debt-distressed economy, rising Asian and Chinese affluence....perhaps the future of the USA is cheap manufacturing.
Just some of the thoughts I'm ruminating on these days.