Most everything you’ve heard about China’s currency, the yuan, is dead wrong.
It’s not undervalued and it’s not undercutting the U.S. dollar. In fact, it’s setting up a boon to U.S. stock investors.
You see, the yuan used to be a cheap currency before 2008. But this changed after the Chinese government responded to the global recession with massive stimulus investment spending. Driven by the greatest construction spree in history, Chinese banks lent out trillions and the country’s money supply grew three times as fast as the U.S. money supply.
For five years, Chinese banks recklessly lent money to local governments and other state-owned enterprises, enriching government officials, bankers and state-owned enterprise managers.
Since then, the yuan has lost 60% of its value. And it’s setting up a massive real estate bubble.