China and the yuan: What's at stake

This article is about the tension going on between US and China about the valuation of Chinese Yuan. U.S. Treasury Secretary Timothy Geithner's surprise visit to China this week hinted people of an agreement that China and US about the valuation of yuan. If there is an agreement, experts believe the exchange rate of Yuan will go up 2-3% immediately and 7% every year. This puts Chinese markets for goods in jeopardy becuase this will make their goods more expensive to global buyers and expose to worldwide competition. In many goods sector China had the monopoly becuase they had the least manufacturing cost with very hi-tech backward linkage. Now what we have to look for is how China manages to compete with other global players when it's currency appreciates and it doesn't get the advantage it used to have. This is I think quite similar to what happened when US lifted the quota system from the garments imported to the United States. Many other countries profited from that. Though it's a different issue but the truth is China if it is to keep up it's export and compete with other countries it has to keep it's currency exchange rate low.