Strengthening the Renminbi?

I have some suspicions about the motivations for stories on a strengthening Renminbi at this time. The “Financial Times” just published, “China hints at stronger renminbi.”

Regardless of the motivations for this at this time, one should ask some questions.
1) Is this a slippery slope of expectations?
2) Is there really a political solution for where things end up going once expectations get going?

I believe the EU and Japan are in position to ask for some favors, but it’s not clear to me that a stronger Chinese currency against the greenback has really been thought through.

At Harvard University, yesterday, and in previous talks, Dwight Perkins has hammered home the idea that China does not consume enough. His idea seems to dovetail with rebalancing the China-U.$. relationship to boost Chinese consumption and thus, presumably, U.$. exports.

Martin Feldstein has also taken aim at the China-U.$. current account.(2) This is to get at the idea of whether or not the U.$. economy’s Ponzi-like character can be addressed without talking about China.

In other news, Dwight Perkins and a colleague reported yesterday that they see no evidence for negative developments in economic inequality in this downturn. Latin America has gone through with re-distribution policies and China seems to have started a massive redistribution of investment to the countryside, since before the downturn.

Note:
1. 12Nov09, http://www.ft.com
2. http://www.time.com/time/world/article/0,8599,1934113,00.html

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