Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

China's Currency Stand and Japan's Lost Decade

Posted by: Bruce Einhorn on March 25, 2010

As calls grow louder in the U.S. for the Obama administration to pressure China over its undervalued currency, it’s good to check in with William Fung, group managing director of Li & Fung, the giant Hong Kong-based trading company that sources goods from China and other countries for companies such as Wal-Mart and Talbot’s. I spoke to Fung today when he stopped by the Bloomberg office to talk about Li & Fung’s disappointing earnings. (More on that news here.) When it comes to the fight over the yuan, he doesn’t expect Beijing to budge. To understand why, he says, look back to Japan’s “Lost Decade,” the period after Japan’s real-estate bubble burst in the early 1990s. “Every time I talk to these guys [in China], they say ‘We’re not going to repeat Japan’s mistake,’” he says. For them, mistake was the deal the Japanese made with the U.S. and the Europeans back in 1985 to allow the dollar to depreciate against the yen. According to Fung, Chinese officials are convinced that agreement, signed at the Plaza Hotel in New York, doomed the Japanese. “They think the Plaza Accord was the beginning of the Lost Decade,” he says.

Some people outside China argue a yuan appreciation would help the Chinese achieve their goal of boosting domestic demand, making China less reliant on the export sector (which crashed after the Lehman bankruptcy). Fung doesn’t think Beijing’s ready to buy that line. “They fullY intend to follow Japan and Korea” and focus on exports, he says. “They’re not going to go to this Amercan-style consumer-spending-on-steroids economy for a while. They just don’t believe in it.” In order for Chinese consumers to start spending big, Fung says, Beijing first needs to establish a solid social-safety net so ordinary Chinese people feel more confident in spending rather than saving. “That takes time,” Fung adds, “as you have seen in America.”

One thing to remember: It’s in Li & Fung’s interest for China to keep the yuan down. The company’s traffic is largely one-way, to the U.S. If the yuan is undervalued and exports from China to the U.S. are cheaper, that should suit Li & Fung customers just fine.

TrackBack URL for this entry:

Reader Comments

gabe, san diego

March 25, 2010 01:51 PM

China cheats the International Community.....

Tri Nguyen

March 25, 2010 04:23 PM

What is the Americans stop buying Chinese goods? Until then, the Chinese government will yield to us.


March 25, 2010 08:56 PM

That makes sense. Don't expect anything more than election year rhetoric about the Yuan. Fact is, the multinational companies and retailers LIKE they status quo because they can import cheap goods and sell them at high prices. It is well known that congress and the president's administration does what big business want, not what the people want.


March 25, 2010 10:18 PM

When dealing with the US, one only needs to bear in mind that it does nothing in the interests of others. Even if it is a win-win situation, the US would only do it if the win is bigger for itself.


March 26, 2010 01:01 AM

Truly fascinating! John Lee does India vs. China. Borat, a aka Bharat, does Businessweek. (Make you wonder why the director alleges that Borat is from Kazakhstan, it really is Bharatstan.) No wonder no one now subscribes to Businessweek. Is Bloomberg doing anything credible to clean up house? Looks like even it has degenerated into irrelevance, and has become a junk publisher.


March 26, 2010 02:28 AM

Be careful what you wish for, since you're not gonna like it

Ed Chen

March 26, 2010 07:48 AM

I agree that something needs to be done to end China's manipulation of our economy. However, I believe in addition to strong laws, a strong grassroot movement will be necessary to both pressure our government to take concrete action, as well as provide our government trade negotiators with the tools to bring to their Chinese counterparts to extract a fair trade agreement. By providing our policy makers with a credible domestic boycott against China, the US negotiating position will be strengthened enormously.

If we can convince individual americans to make consciencious choices about buying quality and safe American products we can force Walmart and their ilk to source their products from another country more friendly to ours.

Boycott China NOW!!! China plays unfairly in its trade processes. We can stop it as individuals.

Help us return to a fair trade regime.

I would love to hear your thoughts and recommendations about how to proceed with this project if you find it compelling.


March 26, 2010 11:28 AM

China makes the cheapest clothes, toys, and shoes for Walmart. It assembles TV's and DVD players for Japanese and Korean companies. In order to be the cheapest producer, it has to manipulate its currency. But for how long? Sooner or later, some of this work will migrate to other low wage countries.


March 26, 2010 12:44 PM

What's your friggin problem in life?


March 26, 2010 02:00 PM

I think what China believes regarding the Lost Decade is TRUE; but is it FAIR to the United States.

How long do they think we'll take their crap? With our deficit booming, the Obama Administration appears to be taking the last straw before slapping some serious tariffs on Chinese goods.


March 26, 2010 08:46 PM

China makes the cheapest clothes, shoes, toys, and assembles TV's and DVD's for the Japanese and Koreans. To remain the lwest cost producer, they have to manipulate their currency. If not, then the work will migrate to other low wage countries. For how long can China keep doing this???


March 28, 2010 12:05 PM

Thank you, Fascinated, for confirming what I suspected for awhile now: That BW is basically catering to Indian fantasies of exceptionalism and showing a decidedly anti-Chinese bias in their so-called reportage.

You are right that no one really takes them that seriously in the US and that their circulation is down.

The fact of the matter is that the Obama administration and the Bharati in his cabinet like Kundra want a trade war with China. Well, fine, then he's a one term president and back to the Neo-Conservatives the US will head. And then this Anti-China rhetoric will stop..

Basically the Bharati bring CHEAP to the table. The Chinese bring CHEAP and QUALITY to the table, and the Bharati in Bharati Week and the Obama cabinet can't stand that. So you get hit pieces like this and the 'call to more outsourcing' stupidity that you read here. *sigh*


March 28, 2010 11:32 PM

Now that Europe and America live in a deflationary era cheap Chinese imports are not as necessary as a few years ago. So new tariffs on Chinese imports to America and Europe will be next until the yuan exchange rate is established by the markets, not by the government.


March 30, 2010 02:27 AM

China should stop buying American goods and America stop buying Chinese goods. There should be no trade between the two countries. China will be a bigger market than America in 10-15 years. Who gives a sh1t about what the greedy Americans do or not.

Jordan Shoes

April 7, 2010 05:18 AM

It's so lucky for me to find your blog! So shocking and great! Just one suggestion: It will be better and easier to follow if your blog can offer rrs subscription service.


April 17, 2010 08:26 AM

This is crazy - this article is about China & how it is manipulating it's currency, which is no secret - then why are the comments about India? How come we are getting bashed? Really the chinese have the thinnest skin on the planet - can't you take a little criticizm even while you are caught red-handed? That is sick! Do the right thing - let your currency fight it's RIGHT value - whenever you do something wrong it will always bite you in the end. EARN your way to prosperity, stop cheating.
India is doing the right thing - last year it was about 50 to the dollar, today it is less than 45! I cheer for that - a stronger rupee means a richer Indian, we can unleash the power of the Indian consumer who can live better.


April 17, 2010 05:44 PM

be careful what u wish for....

Post a comment



BusinessWeek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies. Eye on Asia’s bloggers include Asia regional editor Bruce Einhorn, Tokyo reporter Ian Rowley, Korea bureau chief Moon Ihlwan, Asia News Editor and China Bureau Chief. Dexter Roberts, and Hong Kong-based Asia correspondent Frederik Balfour.

BW Mall - Sponsored Links

Buy a link now!