Does China Manipulate it’s Currency?

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Recent bloomberg pocast interviewed William Cline, fellow at IIE and CGD on the above question and also about his paper on The Case for New Plaza Agreement.

World Bank recently released Quarterly update on the Chinese economy;

The change in the exchange rate system and the accompanying revaluation may further slow domestic demand. The impact on the trade balance is likely to be limited, but some of the capital flows associated with an expected revaluation could moderate in the months ahead, and therefore give the authorities more independence in conducting monetary policy. Development of forward markets to allow for hedging of trade and investment related capital flows is now a priority, as is close monitoring of short-term capital flows and exposure of domestic institutions to foreign exchange rate risk. Over time, more clarity on how the authorities will use their increased autonomy in monetary policy will become desirable….

While macroeconomic policymakers should remain alert to the possibility that risks materialize, for now the focus could be more on the structural issue of rebalancing growth. The rebalancing would be away from the relatively volatile export and investment-based growth to more stable consumption-based growth. Measures in social security and shifting government spending away from investment towards health, education, and social safety could help increase consumption's share in GDP, policies that would also help in redressing the surpluses on the current account. To maintain growth and employment creation as consumption increases, however, more efficient investment as well as a shift of investment to services is needed. Financial sector reforms, better corporate governance, and a dividend policy for state enterprises could be measures towards that goal.”

Related;

- For the answer to the question in the title see this post Econbrowser.

- The latest ADB Review has the following two articles which are worth a read; Development Lessons for Asia from Non-Asian Countries by Dani Rodrik and Asia’s Current Account Surplus: Savings Glut or Investment Drought?

2 Comments

China has really many things and ways to make their country leading and they have great visions when it comes to economy and trading. - Sandra Dyche

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This page contains a single entry by Paul published on May 15, 2006 11:49 PM.

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