None of what China is doing will placate the Lindsey Graham's and Charles Schumer's of the world. Both U.S. senators have had a linear focus on China's undervalued currency, as if it were the root cause of the U.S.'s problems. While China's role in global imbalances is indisputable, officials in Beijing didn't put the U.S. where it is.

It was the administration of Bill Clinton that decided to remove Depression-era banking-system safeguards and fight efforts to regulate derivatives. It was President George W. Bush who removed every financial regulation in view, squandered a budget surplus through tax cuts for the ultra-rich and put a pointless war in Iraq on a credit card.

Look in Mirror

China didn't tell Americans to buy homes they couldn't afford. It didn't encourage bankers to take on enough leverage to topple Wall Street's mightiest names. It didn't ask the U.S to flood global markets with Treasuries because it wanted to own a mountain of them. China didn't lobby against reforms that might protect the U.S. from another financial crisis. That will be on President Barack Obama.

Now, U.S. lawmakers who thought China provided the perfect scapegoat for all that ails their supporters need a new boogeyman. Or, they could just look into the mirror and opt to move the U.S. onto a more sustainable economic course.

This weekend's G-20 meeting is such an opportunity. There, China's currency will take a backseat to the gaping budget deficits among industrialized nations. It will be quite a spectacle to see developing-world policy makers wagging fingers at Group of Seven nation members.

David Fuller's view Globalisation has increased economic opportunities but also made the world more competitive. The diligent are prospering but those with an entitlement mentality are falling behind and inclined to blame others for their inability to compete.

I see China's revaluation of the yuan against the USD (monthly, weekly & daily) as a sign of confidence. Consequently this is a good time to update my outlook on China, last discussed in detail on 20th April. Here is a brief section:


Inevitably, a forecast on China will be highly subjective. After all, it is a vast and rapidly changing country with well over a billion people and about which most of us actually know very little. Moreover, some people are pro China, some are anti China, some admire China and others fear China. These reactions are hardly surprising and if anything, are indications of China's importance.

A factual review of the price charts should be considerably less subjective.

China's Shanghai Composite Index (weekly & daily) was a world leader until last July, since when it has been a serial underperformer. However, it has just seen its third upward dynamic in a month, so a close beneath 2480 remains necessary to offset the current outlook for sideways to higher ranging.

Most subscribers participate in China's stock market via Hong Kong listed instruments, including the HSI Index (weekly & daily) and the HSCEI Index (weekly & daily). Both have had toppy patterns since losing upside momentum last November. They subsequently developed a sequence of lower reaction highs, broke beneath their February lows and the 200-day MAs turned slightly downwards recently.

However there was no additional weakness as a rally commenced and today's surge, clearly influenced by China's decision to allow some further strengthening of the yuan, confirms significant downside failures for both indices. Additional upside follow through this week would indicate scope for retests of the upper boundaries.

I think a bullish re-rating of China's stock market is underway. If so, this would certainly be favourable for Asia's other stock markets which have also strengthened recently.