What about the rest of the emerging world?
* Feb 5th 2010, 17:12 by R.A. | WASHINGTON
ARVIND SUMBRAMANIAN has a Financial Times piece up which argues that the world should be concerned about China's undervalued currency, not because it limits exports from America, but because it negatively impacts other emerging markets:
In the short run, with capital pouring into emerging market countries, their ability to respond to the threat of asset bubbles and overheating is undermined. Emerging market countries such as Brazil, India and South Korea are loath to allow their currencies to appreciate – to damp overheating – when that of a major trade rival is pegged to the dollar.
But the more serious and long-term cost is the loss in trade and growth in poorer parts of the world. Dani Rodrik of Harvard University estimates that China’s undervaluation has boosted its long-run growth rate by more than 2 per cent by allowing greater output of tradable goods, a sector that was the engine of growth and an escape route from underdevelopment for postwar successes such as Japan, South Korea and Taiwan.
Higher tradable goods production in China results in lower traded goods production elsewhere in the developing world, entailing a growth cost for these countries. Of course, some of these costs may have been alleviated by China’s rapid growth and the attendant demand for other countries’ goods. But China’s large current account surpluses suggest that the alleviation is only partial.
I would say that Mr Subramanian's "of course" caveat there at the very end is very important. The growing Chinese market has borne up many of its neighbours with it, and while other industrialisers have likely suffered some from Chinese competition, exporters of primary resources, who may in general be poorer than industrialising emerging markets, have done well. And while we can't know the but-for outcome, it hardly seems that the Indian and Brazilian economies are stalling under competitive pressure from China.
But I agree that this is something worth taking seriously. And I also agree with this:
By default, it has fallen to the US to carry the burden of seeking to change renminbi policy. But it cannot succeed because China will not be seen as giving in to pressure from its only rival for superpower status. Only a wider coalition, comprising all countries affected by China’s undervalued exchange rate, stands any chance of impressing upon China the consequences of its policy and reminding it of its international responsibilities as a large, systemically important trader.
It is a very bad idea for America to take the lead on this. American pressure is risky and likely to prove counterproductive. We have seen no indication that intensified American pressure will change Beijing's mind, and I don't understand why writers like Paul Krugman continue to argue that if America were to "get tough", some headway could be made.
* Feb 5th 2010, 17:12 by R.A. | WASHINGTON
ARVIND SUMBRAMANIAN has a Financial Times piece up which argues that the world should be concerned about China's undervalued currency, not because it limits exports from America, but because it negatively impacts other emerging markets:
In the short run, with capital pouring into emerging market countries, their ability to respond to the threat of asset bubbles and overheating is undermined. Emerging market countries such as Brazil, India and South Korea are loath to allow their currencies to appreciate – to damp overheating – when that of a major trade rival is pegged to the dollar.
But the more serious and long-term cost is the loss in trade and growth in poorer parts of the world. Dani Rodrik of Harvard University estimates that China’s undervaluation has boosted its long-run growth rate by more than 2 per cent by allowing greater output of tradable goods, a sector that was the engine of growth and an escape route from underdevelopment for postwar successes such as Japan, South Korea and Taiwan.
Higher tradable goods production in China results in lower traded goods production elsewhere in the developing world, entailing a growth cost for these countries. Of course, some of these costs may have been alleviated by China’s rapid growth and the attendant demand for other countries’ goods. But China’s large current account surpluses suggest that the alleviation is only partial.
I would say that Mr Subramanian's "of course" caveat there at the very end is very important. The growing Chinese market has borne up many of its neighbours with it, and while other industrialisers have likely suffered some from Chinese competition, exporters of primary resources, who may in general be poorer than industrialising emerging markets, have done well. And while we can't know the but-for outcome, it hardly seems that the Indian and Brazilian economies are stalling under competitive pressure from China.
But I agree that this is something worth taking seriously. And I also agree with this:
By default, it has fallen to the US to carry the burden of seeking to change renminbi policy. But it cannot succeed because China will not be seen as giving in to pressure from its only rival for superpower status. Only a wider coalition, comprising all countries affected by China’s undervalued exchange rate, stands any chance of impressing upon China the consequences of its policy and reminding it of its international responsibilities as a large, systemically important trader.
It is a very bad idea for America to take the lead on this. American pressure is risky and likely to prove counterproductive. We have seen no indication that intensified American pressure will change Beijing's mind, and I don't understand why writers like Paul Krugman continue to argue that if America were to "get tough", some headway could be made.