economy - No revaluation needed - Stiglitz

Joseph E. Stiglitz

China does not need a revalutation, argue professors Lawrence Lau and Joseph Stiglitz in an (unlinkable) article in the Financial Times today. Both deny the US allegation that the Renminbi is undervalued and should be revalued. There is hardly any inflation and the trade deficit is not as high as could have been expected. And:

America blames China for the bilateral trade deficit; but America's trade deficits are a result of its huge fiscal deficits and the fact that Americans do not save. America's defence that it is doing the world a service by consuming vastly beyond its means is self-serving and rings hollow: US fiscal policies and low savings have become the fun damental source of global imbalances.

Revaluation would only benefit the speculations, they argue and plead for an export tax.

Finally, an export tax would not reward currency speculators. It may even iscourage the speculation that has complicated macro-economic management of China's economy. If potential speculators can be convinced that China would rather impose an export tax than revalue, less "hot money" will flow into China. By contrast, nothing encourages speculators more than a "victory", especially where, as here, it is likely to do little to correct the underlying problems.

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Books by Joseph E. Stiglitz