Paul Tudor Jones On The Chinese Yuan And How It's Hurting The US

china military march

Photo: @ alex on flickr

In his latest letter to investors, Paul Tudor Jones reiterates in 6 simple charts that the Chinese RMB is too weak against the US dollar and is hurting the country.It’s causing job losses, inflation, and at least one other Asian country to follow suit and devalue their currency against the dollar.

To solve the problems inherent in the following 6 charts, PTJ suggests the following:

Intervene. Exert influence in the foreign exchange market on the Hong Kong dollar exchange rate to speed up the RMB appreciation.

You can download the full letter on Dealbreaker.

Since 1994, when China devalued its currency, foreign holdings of US Treasuries have risen from 20% to nearly 50% of outstanding issuance.

Source: Dealbreaker

And owing 50% in outstanding Treasuries to foreign countries usually increases the probability of both sovereign default and inflation.

Source: Dealbreaker

The Chinese RMB is 35%-72% cheaper against the US dollar this year than it was in 1993 (on a productivity adjusted purchasing power parity basis (depending on what you're buying)).

Source: Dealbreaker

And it's totally out of whack. Since the dollar peaked in 2009, the RMB has appreciated the least of the 13 currencies below:

Source: Dealbreaker

Probably as a result of Chinese influence and a $16.5 billion trade deficit with China, Vietnam devalued 8.5% against the dollar last week, despite a trade surplus with the US.

Source: Dealbreaker

And it's killing competitiveness in the U.S. manufacturing sector: six million jobs have been lost in the U.S. manufacturing sector to the cheaper Chinese manufacturing sector.

Source: Dealbreaker

Those aren't the only problems PTJ sees with Chinese currency devaluation.

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