Hubert Fromlet: The global financial crisis and China’s exchange rate policy
12 Nov 2009 | Posted By: JIBS Stories
On July 21 in 2005, China officially declared its transition from a dollar-fixed exchange rate policy to a floating regime. For a couple of years, the Chinese renminbi (RMB) actually appreciated (strengthened) – though much more slowly than American interests were pleading for.
However, during the still ongoing global economic crisis, China more or less returned to a stable exchange rate policy vis-à -vis the U.S.currency – which happened in times when trade disequilibria had reached risky or even dangerous dimensions between the two countries, and, consequently for the rest of the world.
Furthermore, the euro at present certainly is undervalued against the RMB. Today, China’s exchange rate policy also has a negative impact on other Asian currencies like the Taiwan/Singapore dollar and the Korean won. Now, time has come for China to reconsider its exchange rate policy and to again go for a gradual appreciation policy. The attempts to stabilize the global economy urges for a Chinese participation, too – particularly since China visibly has been improving its global political influence during the global financial crisis. This should also imply an increased global economic responsibility.
Read the full text on Hubert Fromlet’s blog (in Swedish)
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