The news at a glance

China: Loosening its hold on the yuan

China announced that it would let the yuan rise “gradually” against other major world currencies, bowing to international protests that it was keeping its currency and export prices artificially low, said Elaine Kurtenbach in the Associated Press. A yuan that no longer trades at a fixed rate of 6.83 to the dollar should help China curtail inflation, stimulate domestic demand, “and reduce the country’s reliance on exports as a key driver for growth.” The move should also blunt criticism of its currency policies at the meeting of the G20 industrialized nations in Toronto this weekend. Bets placed by currency traders in the futures markets indicate that they expect the yuan to appreciate about 2.3 percent against the dollar by year-end.

A stronger yuan is good news for multinational companies aiming to “target China’s consumers, while complicating life for those that rely on low-cost exports from the world’s factory floor,” said Jason Dean in The Wall Street Journal. The change won’t be immediately apparent, but as Chinese citizens gain purchasing power, U.S.-based exporters such as Coca-Cola, Motorola, and General Motors should benefit. A stronger yuan also helps non-exporting U.S. companies, which will face less competition from Chinese imports.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Mortgages: Fannie’s and Freddie’s bailout costs soar

The tab for the federal bailouts of Fannie Mae and Freddie Mac, which guarantee more than half of all U.S. mortgages, now stands at $145.9 billion, making them the most expensive bailouts of the financial crisis, said Binyamin Appelbaum in The New York Times. The companies, both 80 percent owned by the U.S. government, are clearing away the wreckage of the housing boom “at public expense, removing owners who cannot afford their homes, reselling the houses at much lower prices, and financing mortgage loans for the new owners.” Experts now estimate that the long-term costs of Fannie’s and Freddie’s bailouts will top $380 billion.

Deals: BASF and Cognis agree on a price

German chemicals company BASF has tentatively agreed to acquire Cognis, a German specialty chemicals company, for $4.1 billion, signaling that business confidence is strengthening in Europe in the wake of the Greek debt crisis, said Daniel Schafer in the Financial Times. The two companies had been “haggling for months over the price” for Cognis, a medium-size maker of chemicals for food additives, detergents, and health products.

Autos: The mighty tumble in J.D. Power survey

The latest survey from J.D. Power & Co. shook up the ranks of the world’s highest-quality carmakers, said David Welch in Bloomberg.com. Toyota, rocked by the sudden-acceleration problems plaguing some of its cars, turned in its worst-ever performance, tumbling from sixth place to 21st, as consumers complained of 117 problems during the first 90 days of ownership for every 100 vehicles purchased, up from 101 a year ago. Chevrolet and Cadillac buyers also reported an uptick in problems.

Toyota: Beijing settles strike

“Swift government intervention” has ended a strike at a Chinese auto-parts plant closely allied with Toyota Motor, said Norihiko Shirouzu in The Wall Street Journal. The rapid-fire settlement comes after high-profile labor disputes at the plants of other foreign carmakers. Beijing’s role in resolving the dispute suggests “a heightened level of government concern about spreading labor unrest in China.”