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CHINESE ECONOMICS: In the coming weeks and months, it is likely that the Chinese regime will receive more scrutiny from the international community for keeping the value of Chinese currency artificially low. (Photos.com)
Tim Geithner, Hillary Clinton, and 200 other American bigwigs visited China this past week. First on the agenda: China’s position on the rising tensions between North and South Korea.
With the rest of the major economic powers of the world standing against the actions of North Korea, a nuclear threat run by an oppressive regime, a neutral-standing China poses a reasonable concern for future global stability.
Another significant topic Geithner was hoping to make headway on was China’s currency policy. But China had little to say on the matter.
China’s currency continues to be a subject the United States is willing to tap dance around diplomatically. Because when the gloves eventually do come off, U.S.-China relations could rapidly collapse.
That’s why China’s alignment on the Korean peninsula tensions is of particular significance.
It puts the catalysts in place for potential fallout between China and the Western world, which could mean economic war and perhaps military war ahead.
I think China’s currency policy represents too big a risk to global economic recovery and global stability for Washington to continue granting a stay. So today I want to revisit two of the arguments I’ve laid out in past Money and Markets columns to explain why we should worry about China, despite the headlines about it being an engine of global growth.
Currency Manipulation Poses a Roadblock
China’s currency manipulation poses a roadblock to sustainable global economic growth. The G-20, the International Monetary Fund (IMF), the Organization for Economic Cooperation and Development (OECD)—all of the major institutions and central banks of the world have been harping on the importance of repairing global imbalances over the past year … and for good reason. When they do this, they’re talking specifically to China.
Over the last 14 years, China’s economy has grown a whopping eightfold, to $4.9 trillion, and it has quickly soared to become the world’s third largest economy.
