Oh really? Last year CCP announced they were going to be dropping housing prices by as much as 40%, so everybody get ready. Guess what... it never happened. Housing prices are still on the rise and at double digits. They don't have the guts to drop prices because it will cause a banking crisis.
Yuan didn't appreciate, the US dollar fell due to quantitative easing. PBOC couldn't afford to drop it that low to keep up or inflation would sky rocket. CCP isn't as flexible as you think.
So in summary, no. China is not very stable with a 1 party government. It has tied its hands on the amount of monetary policy methods at its disposal because it is so fragile, any major shock will bring down the exporters living on the margins or the property bubble which is now the new impetus of growth in China. The value of the currency all depends on how much the property values are real or inflated. When CCP says it is up to 40% over valued, you know you have a problem. The quai is probably at or slightly above its real value. Raising interests rates is the only meaningful way to combat inflation if raising reserve requirements does not stop banks from lending. There is so much hidden lending going on, 2010 is going to exceed 2009. Reserve requirements has been the only thing PBOC has done the past couple years, now they moved 25 basis points when they need to move 300-400.
Sure, where did you get the idea that China's inflation is not a large factor in its stability equation? Everyone in China knows this, including the Frenchy in GZ.
1. not the same thing
China's banks can tolerate housing price drop between 30% to 40%
http://www.china.org.cn/video/2010-05/12/content_20024686.htm
unless you are talking about something else
2.
President Hu Jintao said Monday that China would continue to allow its currency to appreciate,
http://www.economyincrisis.org/content/china-pledges-allow-currency-appreciate
"China has a history of allowing its currency to appreciate before a major international event," Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong told MarketWatch.
http://www.nuwireinvestor.com/artic...hest-level-in-18-years-against-the-56753.aspx
"The RMB has appreciated by 21 percent since 2005 and the gradual and measured growth of the currency is the right policy for China," Sakakibara said."
http://www.china.org.cn/opinion/2010-04/03/content_19742171.htm
i think i have enough to prove China has in fact allowed appreciation.
3. your logic is horrible. by definition, a 1 party state is more stable because they are not threatened by other parties. while there are limits to what CCP can do, the recession fully proved China is quite fine compared to other countries. good so you realize now RR DOES work. your so called "if" and "hidden lending" needs links. especially since Chinese banks are state owned, i find it amusing you claim they are breaking their own rules.
4. anyway, you spend most of your reply bringing up erroneous side factor like hidden lending and when i bring up other method besides interest or even interest itself you say it is not enough. degree wasnt even the point, it was whether or not.
5. inflation is a big problem for China but it doesnt threaten China's stability any more than raising interest is the ONLY way to fight inflation or that the ONLY way China is fighting inflation is RR. like i posted, other countries have either worse inflation or similar inflation trends as China. so if China's stability is in question due to inflation others are worse as proved already by the world recession.