If the Yuan's So Cheap...

...why don't we just buy some? I'm tired of all this whining about currency manipulation. Yes, the Chinese yuan is undervalued. Yes, the Chinese manufacturers get a big leg-up: they're able to practically give away goods to anyone not paying in it. And yes, that places the rest of us at a disadvantage. But think of it this way:

Say you're vacationing in China. Somehow, you managed to smuggle $10,000 through customs. Wheee! Everything's cheap for you, right? That means if you exchanged your $10,000 for, say, ¥80,000 (a totally hypothetical exchange rate), you'd be getting a raw deal. You'd be able to buy far less. But if you planned on leaving tomorrow, then you'd be scoring huge. Why? Well, everyone believes the yuan's dirt cheap; it should be worth more in dollars. (And I tend to agree.) But it can't stay cheap forever. So if you take some home and wait long enough, you'll score big. Just bide your time until it is worth more dollars.

Conventional wisdom says otherwise. Conventional wisdom says we'll never see a stronger yuan because we never have. Conventional wisdom says we've never seen a freely-traded yuan, and so we never will. But I disagree. After long enough, we'll hit a tipping point. It's a rising power we're talking about here, but it's one that ultimately will rise. And when that happens, the yuan is going to follow. Right now, China's a paradise for producers, but only by being a consumer's hell. The people of China aren't paying for groceries in euros or dollars; they're paying for them in yuan. And so whenever they make a purchase, they take a hit. Granted, we haven't seen much resistance yet—but that doesn't mean we won't. The more the Chinese earn, the more they'll notice the difference. And the more they'll demand a change.