1. How would ag exporters lose?  Low­er­ing the RMB price of ag imports should raise sales, not low­er them.  Rais­ing the dol­lar price of Chi­nese exports should help ratio­nal­ize China’s irraion­al use of land and water.

    The cen­tral issue for the trad­ing and mon­e­tary sys­tems is that a large coun­try like Chi­na that prac­tices state cap­i­tal­ism is sim­ply out­side of the ambit of “nor­mal” inter­na­tion­al rules.  The IMF can­not deal with China’s bla­tant dis­re­gard of Art. 4 oblig­a­tions.  The WTO can­not deal with China’s mas­sive sub­si­dies, state own­er­ship and state influ­ence over the allo­ca­tion of almost everything.

    It would be good for Aus­tralians, ag pro­duc­ers in par­tic­u­lar, to pay more atten­tion to the sys­temic cri­sis and less to their short-run sales and profits.

  2. The impact of a high­er val­ued RMB would nor­mal­ly be to lift con­sump­tion from imports; that’s true.

    But Chi­na is a major pro­duc­er of meat, grains and hor­ti­cul­ture that is at almost self-suf­fi­cient, in most years. It has nev­er come even close to fill­ing the import quo­tas for grains that it agreed when it joined WTO.

    It needs some CGE mod­el­ling; but my guess is that low­er RMB prices for imports (say 15%) are not like­ly to see big changes in China’s agri­cul­tur­al imports; cer­tain­ly not in com­mod­i­ty products.

    In fact, one con­se­quence of a high­er RMB will be to slow the move­ment of resources into the export/manufacturing sec­tor and prob­a­bly to lift agri­cul­tur­al pro­duc­tion. Chi­na will be more self-suf­fi­cient; domes­tic pro­duc­tion more competitive.

  3. Don’t mis­take Chi­na for a mar­ket econ­o­my.  The Par­ty, not the mar­ket, will heav­i­ly influ­ence deci­sions on resource allo­ca­tion.  Sure, more com­mer­cial agri­cul­ture lies ahead for Chi­na, but there’s no great incen­tive for the gov­ern­ment to race for­ward in that regard as the sur­plus labor prob­lem would only be aggra­vat­ed by pro­duc­tiv­i­ty gains.

    More­over, Chi­na is run­ning out of water.  That’s an issue not just for agri­cul­ture but also for steel and golf course development. 

    Final­ly, Chi­na has one mil­lion food pro­cess­ing plants and no abil­i­ty to inspect them nor ensure their quality.

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