Michael Pettis, writing about the RMB revaluation issue yet again. Quite possibly the best and most accessible summary of the linkage between the value of the currency in China and exports. There is a linkage, but as Pettis explains, it is not exactly the same one that you might think.

Lots of opinions floating around out there, and as usual they are influenced by politics. You have the protectionists on one side, and the apologists on the other. Neither of them get the story right in my opinion, mostly since they have already made up their mind for one reason or another.

But I'm not an economist. Go read this stuff from someone who knows the topic better than a wanna-be like me.

My only question about Pettis' explanation is the relationship between excess production and export pricing. If you have a lot of extra stuff lying around, then you export it – makes sense. But there are real limits on exporters' ability to set their own prices, as Pettis discusses.

Sure, you might have the ability to set prices in some industries, but not in a lot of others. I think we're talking about pretty tight margins for a lot of these guys, particularly when you acknowledge that only a certain amount of value added takes place in China prior to export.

I know that market forces are not acting properly to allow for wise investment decisions, but is there no relationship between investment and anticipated profits with these ventures? If there is, why wouldn't this act to limit investment?

Confusing, to say the least. Perhaps I should stay out of the deep end of the pool.