Devaluing the yuan

Continuing with Thursday’s China theme, SocGen’s Albert Edwards has been looking at the emergence of a trade deficit in the People’s Republic and the implications.

The backstory here is the recent, surprise announcement from Premier Wen Jiabao and Commerce Secretary Chen Deming that China would record a trade deficit in March – the first since April 2004.

The deficit, of course, is one result of the massive Chinese stimulus package focused on infrastructure, which has sucked in massive amounts of commodities.

And obviously Edwards thinks this is going to have serious ramifications.

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If indeed China were to de-value their currency (by letting it float freely) how would the China bashers in Congress react?  Would they put their brains in gear before their mouths or is that too much to hope for?  See below for more evidence of problems in China.

Is China blowing bubbles?

Yes, says Citigroup’s Willem Buiter, who thinks the Chinese authorities will fail in their efforts to prevent a classic boom, bubble and bust asset sequence.

More unexpected trends: