Economist's Corner: Potential Problems for Firms with China Operations - Deloitte Research - Deloitte Touche Tohmatsu

Economist's Corner: Potential Problems for Firms with China Operations - Deloitte Research - Deloitte Touche Tohmatsu

Although there might be signs showing that RMB will go up further, I would personally bet on the contrary, at least for short term.

For Chinese government, the worst fear is not inflation, but unsustainable economic growth. My estimate is that Chinese government will continue to buy U.S Dollar positions to keep the exchange rate still.

For companies which have operations in China, there's not that much to fear unless they operate in China solely for cheap labor. While most Taiwanese companies operating in China do have a focus on its cheap labor, most western, branded company stay in China for its immense market and potential consuming power. Even with inflation, the overall purchasing power of Chinese will most likely be rising, presenting a greener pasture in current worldwide economy.