Yuan obsessives are missing the point

The ascent of the yuan this year has brought with it some of the usual handwringing about the impact on China’s exports.

The anxiety misses the point about modern China, as does much of the political conversation in America. A peek at recent data from China is instructive. The really important numbers weren’t a decline in exports, but a jump in consumer sentiment and a rise in imports.

With consumption and services now accounting for more than half of Chinese gross domestic product, it matters less and less what the yuan does (it is up about 7% versus the dollar this year), absent a dramatic and abrupt shift that suggests a breakdown in policy or something seriously amiss.

The rebalancing within China’s economy — long sought but rarely acknowledged since it arrived — also helps explain why the country has beaten growth forecasts this year despite the incessant warnings of a heavy debt load.

I’ve written before about the aggressive plans of Starbucks and what that says about the changing face of China’s economy. The country’s consumers are in an upbeat mood. An index of sentiment published by the National Bureau of Statistics shows confidence the strongest since 1996.

Lest that figure be criticised because it is published by the government, the international market research firm Nielsen came to broadly the same conclusion. Its private consumer confidence index climbed to its highest since at least 2009. Willingness to spend hit a new high while readings on employment and personal finances also advanced.

Not that exports are insignificant. And Chinese authorities are not about let the yuan go where it pleases just because young professionals in Shanghai want an extra shot with their latte. But it’s not your grandfather’s China anymore. That textile plant that left North Carolina in the 1990s may not even be in China anymore. It may have moved somewhere cheaper long ago.

The yuan’s advance reflects at least partly the unexpected strength of the economy this year, a decline in the dollar, and authorities’ relative comfort with the currency’s movement for most of the year.

While Beijing figures out where it wants the yuan to be, the task has a bit less urgency thanks to the transformation of the economy. Now investors need better data on the new engine of the Chinese economy — so they are scouring industry and corporate data to build databases that best capture the consumer emergence.

More and more, the Chinese consumers’ habits may look familiar. There may even be data for that American lunch China is supposed to be eating.