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let's think about what would happen inside of china if the government were to allow its currency to completely float against the dollar so we know that the byproduct would be its currency would strengthen because so far they've been artificially weakening it so you would have a stronger a stronger join and you would have a weaker and you would have a weaker dollar i want to be clear the chinese government actually has been allowing the u.n to slowly strengthen against the dollar but it keeps maintaining a peg we want to just think about what happens if it were to completely float now the obvious byproduct of this we know that when it kept the currency weak that'll that favored its exports it allowed its exports to be cheaper creating demand for the exports now if they allowed their currency to strengthen then their exports would be more expensive in other countries so it would decrease it would decrease demand for exports now with fewer exports fewer production perhaps in their factories now this obviously would slow down this would slow down the chinese economy slow down economy now this we have to be careful here when we say slow down this doesn't mean that they'll necessarily fall into a recession they've been growing at the high single digits to low double digits for many many many years now when we talk about slowing down they might slow down to maybe four or five percent growth which is still super fast by any other nation standards we've also seen that there's a ton of inflation in china and to some degree that kind of hints that the chinese consumer is ready to take up the slack from foreign consumers so it might not even slow down as as as we might i guess at first think and that brings up maybe the first unambiguous positive behind allowing their currency to strengthen if they were to actually stop printing when and buying other currencies it would actually slow down inflation it would actually slow down inflation and already we we know that they're getting dangerously close to kind of an inflationary spiral that they they've been reporting five six percent inflation the reality might be closer to ten percent and the inflation is actually going to be mitigated not just from the fact that you have less when running around but and and the economy slowing down but it's also because the wind is strengthening and when it's stronger it allows them to buy imports more cheaply and for the chinese perhaps the most important import or imports are commodities and the most important of the commodities is oil so the price of oil would go down now a bigger question this one's harder to answer is what happens to chinese manufacturing in general manufacturing a lot of people the argument why china was able to build its manufacturing bases it had this weak currency and that allowed it to build these ecosystems and get to scale at it in its factories will the manufacturing then go back to the u.s or europe my my gut is is that it wouldn't go back to the u.s and europe because anything that requires huge amount of scale and huge amount of labor is going to be very hard for the chinese to compete with the chinese even if their currency was stronger i think at that point china is going to have to worry about other developing nations maybe india maybe latin america where they have labor advantages relative to china and if they were able to kind of have the same efficiencies in the same infrastructure in the same scale they might be able to give them a run for their money this is salman khan of the khan academy for cnbc