{"id":503548,"date":"2010-04-01T15:36:22","date_gmt":"2010-04-01T19:36:22","guid":{"rendered":"tag:www.economist.com,21005797"},"modified":"2010-04-01T15:36:22","modified_gmt":"2010-04-01T19:36:22","slug":"leave-china-alone","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/503548","title":{"rendered":"Leave China alone"},"content":{"rendered":"

THE case for getting tough with China continues to seem extremely tenuous. Today, Tyler Cowen<\/a> links to a couple of good resources on the subject. Here<\/a>‘s a relatively new paper by Ray Fair, for instance, the abstract to which reads:<\/p>\n

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This paper uses a multicountry macroeconometric model to estimate the macroeconomic effects of a Chinese yuan appreciation. The estimated effects on U.S. output and employment are modest. Positive effects on U.S. output from a decrease in imports from China are offset by negative effects on U.S. output from increased inflation and from a decrease in U.S. exports to China because of a Chinese contraction.<\/p>\n<\/blockquote>\n

And here<\/a>‘s a Financial Times<\/em> piece that notes:<\/p>\n

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With respect to domestic demand in China, there is rather clear evidence that, if anything, it is currently too strong, and certainly not at a level to justify accusations that China is not doing its \u201cbit\u201d for the world economy. For about 13 years we have used our own proprietary gross domestic product indicator for China, the so-called Goldman Sachs China Activity index. At the moment, this is growing at an annual rate of more than 14 per cent. Indeed, and somewhat ironically, it is likely that if Washington and others could keep quiet, Chinese policymakers would probably be more eager to do things to ease the inflationary pressures arising from this growth, including introducing more flexibility to the exchange rate…<\/p>\n

As far as China\u2019s involvement with the rest of the world goes, the real story since the worst of the crisis is not China\u2019s recovering exports<\/a> but China\u2019s strong imports. The forthcoming trade release \u2013 interestingly due a few days before the Treasury report \u2013 is likely to demonstrate enormous import growth again, absolutely and relative to exports. This is seen not just in Chinese data, but in those from many other important trading nations. Indeed, quite remarkably, Germany\u2019s trade with China is showing such strong growth that by spring next year, on current trends, it might exceed that with France. China last year reported a current account surplus of 5.8 per cent of GDP, significantly lower than apparently assumed as the current level by many people in Washington. In 2010, it could be closer to 3 per cent \u2013 incidentally below the 4 per cent level deemed as \u201cequilibrium\u201d by the Peterson Institute for International Economics.<\/p>\n<\/blockquote>\n

I particularly appreciate the FT<\/em>‘s invocation of the Peterson Institute and its suggestion that an American policy of keeping quiet would be most helpful. Just today, Real Time Economics published an interview<\/a> with the Peterson Institute’s Fred Bergsten, which contains this exchange:<\/p>\n

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Would these tactics make it more or less likely that China would revalue its currency?<\/strong><\/p>\n

Bergsten:<\/strong> I think that in the short run, it would be a little less likely. But one or two or three months out, it would be more likely. China wouldn\u2019t want to have long period where there are multilateral cases against it.<\/p>\n

In \u2018X\u2019 months down the road, based on internal considerations, they\u2019ll let the currency rise. Short run, they\u2019d huff and puff.<\/p>\n<\/blockquote>\n

But the New York Times<\/em> has a story<\/a> up right now which reads:<\/p>\n

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[T]he announcement by Chinese authorities on Thursday that President Hu Jintao<\/span> will be visiting Washington in two weeks is being seen as the beginning of a possible easing of the friction over the renminbi.<\/p>\n

China experts said it was unlikely that China would have agreed to the visit unless there was at least an informal assurance by the Treasury Department<\/span> that it would not be named a currency manipulator either on April 15 \u2014 the deadline for the Obama administration to submit one of its twice-a-year reports on foreign exchange to Congress \u2014 or in the ensuing weeks.<\/p>\n

At the same time, economists say the visit, and other Chinese moves, suggest China is finally willing to let the renminbi increase in value.<\/p>\n<\/blockquote>\n

In other words, the tactics Mr Bergsten wants to use in confronting China are quite likely to increase<\/em> the time it will take China to revalue. But perhaps they will have made American leaders feel better, for having been “tough”?<\/p>\n","protected":false},"excerpt":{"rendered":"

THE case for getting tough with China continues to seem extremely tenuous. Today, Tyler Cowen links to a couple of good resources on the subject. Here‘s a relatively new paper by Ray Fair, for instance, the abstract to which reads: This paper uses a multicountry macroeconometric model to estimate the macroeconomic effects of a Chinese […]<\/p>\n","protected":false},"author":4534,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-503548","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/503548","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/4534"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=503548"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/503548\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=503548"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=503548"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=503548"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}