ve1146c.jpg

Making Room for China

Currency undervaluation is currently the Chinese government’s main instrument for subsidizing manufacturing and other tradable sectors, and therefore promoting growth through structural change. The massive global current-account imbalances that have resulted are the price that China and the world economy must pay for WTO rules that prohibit direct industrial policies.

CAMBRIDGE – China’s undervalued currency and huge trade surplus pose great risks to the world economy. They threaten a major protectionist backlash in the United States and Europe; and they undermine the recovery in developing and emerging markets. Left unchecked, they will generate growing acrimony between China and other countries. But the solution is not nearly as simple as some pundits make it out to be.

https://prosyn.org/f8YfrCc