US$1 hit RMB6.50 today

This means the export-led model of the last 30 years is changing.  Growth in the next 30 years will probably be IP and brand-driven.

The export model is no longer viable: labor and fuel costs are prohibitive and the land is polluted.  Labor cost increased some 30% to 100% in 2010 on top of currency exchange increase.  Harvesting and canning mandarin orange in Hunan, trucking the cans to Shanghai, crossing the Pacific Ocean to Long Beach and then on to a freight train to Walmart depots across the country no longer make sense.

China has >$3 trillion in foreign currency reserve, and counting.  The money has to come back to the U.S. sometime.  Unlike the Japanese in 1980s, they will not be buying trophies:  Pebble Beach, Rockefeller Center, Hawaiian Hotels… Instead the Chinese will be looking to extend their manufacturing and supply chain base to reach consumers directly.  This means buying Western brands.

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About joseph1ng

Trained as a historian at Stanford, certified as an accountant, geeky by nature, CFO with U.S. and Chinese companies. Lived in Beijing, Shanghai, Tokyo but mostly in the Silicon Valley. China's $3 trillion foreign currency reserve will be deployed buying brands to bridge their supply chain to consumers.
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