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‘If China Stops Manipulation, Its Currency Will Depreciate’
Jeff Frankel:
If China Stops Manipulation, Its Currency Will Depreciate: A rare issue on which the two parties in the US Congress agree is the problem of “currency manipulation,” especially on the part of China. Perhaps spurred by the 2014 appreciation of the dollar and the first signs of a resulting loss of American net exports, Congress is once again considering legislation to attack currencies that are seen as unfairly undervalued. The proposed measures include the threat of countervailing duties against imports from offending countries, although that would be inconsistent with international trading rules.
Even if one accepts the possibility of identifying a currency that is manipulated, however, China no longer qualifies. Under recent conditions, if China allowed its currency to float freely, without intervention, the renminbi would more likely depreciate against the dollar than appreciate. US producers would then find it harder to compete on international markets, not easier. …
Dean Baker tweets:
this assumes that only flows affect currency values and not stocks. The fact China holds close to $4tr in reserves likely matters
Source: http://economistsview.typepad.com/economistsview/2015/02/if-china-stops-manipulation-its-currency-will-depreciate.html
