In all honesty one of the factors that has led me to invest so much in Chinese companies is the undervaluation of the RMB. The explosive growth of the middle class and the economy as a whole is the main reason, but currency concerns definitely factor in. Yesterday, I stumbled on the most jaw-dropping estimate for RMB-appreciation I’ve seen yet.
Jim Rogers, chairman of Beeland Interests Inc. and a former partner of George Soros, said yesterday the yuan may quadruple in the next decade. If it did then the yuan would be at 1.8 to 1.9 to the US dollar. China’s economy would be at 13 trillion US dollar even if there was zero growth. I have noted that I expect China’s economy to pass the United STates on an exchange rated basis before 2020.
Non-deliverable forward contracts show traders are betting the yuan will reach 7.0070 in 12 months, a gain of 6.9 percent from the spot rate, and 6.95 by the end of 2008.
The government should revalue the yuan by as much as 20 percent, according to a report circulated inside the National Development and Reform Commission, Market News International said.
This would put the exchange rate at 6 to 1. China’s economy next year would be almost equal to Japan on an exchange rate basis.
Brian Wang: China Currency Update
Normally, I’d be extremely skeptical about this kind of prediction, but Brian’s proven himself to be an expert at predicting the future before.