Triple Crisis Blog invited readers’ questions in advance of the April 24-25 IMF/World Bank meetings in Washingon. This piece is based on a question from a reader on the over-valuation of the Yuan.
Martin Khor
The problem of global imbalances is widely seen as a major issue to be resolved if the world economy is to be on track for a sustained recovery. And this problem is also usually discussed as arising from the economic relations between the United States and China.
In this view, the US has been over-consuming beyond its means, thereby having a large trade deficit, while China has been growing as a result of exports, thus earning large trade surpluses and investing them in US treasuries, thereby making the US over-consumption possible.
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Alejandro Nadal
Triple Crisis Blog has invited readers’ questions in advance of the April 24-25 IMF/World Bank meetings in Washingon. A reader asked:
Q: There has been a lot of discussion recently about the over-valuation of the Chinese currency. How do we know how much it is overvalued? What would the implications be for US and Chinese workers if the government were to decide to devalue it?
NADAL: There is a debate on whether the Chinese yuan is over or undervaluated. The American Manufacturing Association sets the undervaluation of the yuan at 40%. But the Federal Reserve argues that the yuan appreciated 16% between June 2008 and February 2009. According to the Bank of International Settlements (BIS) in Basle the yuan appreciated between February 2007 and January 2010 the yuan appreciated by 10.7% while the US dollar lost 8% of its value.
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