Asian Currency Cooperation: China’s Missed Opportunity

One of the pitfalls of the kind of quick analysis that goes into blog posts is that it's possible, and sometimes even necessary, to click that "publish" button before an argument is fully formed or developed. In my case, when that happens, what's often missing are the intermediate thought processes that lead from whatever triggers a post to its takeaway. In reading back over it, I think this post on Asian currency cooperation from yesterday is a good example of what I'm talking about.

The Ulrich Volz article that triggered the post essentially argued that singling out the yuan exchange rate as the villain in the U.S./EU-China trade imbalances ignores the ways in which those imbalances are actually U.S./EU-East Asian trade imbalances, with China simply being the final assembler and exporter of products whose parts originate throughout the region. So any isolated approach to yuan appreciation will destabilize the specialized regional production chain, adding yet another reason why China will resist such an approach.

As a result, Volz argues, it would be in China's interest to speerhead an East Asian currency accord, so that the region's currencies might then appreciate collectively against the dollar, spreading out and in some ways mitigating whatever pain results from rebalancing global trade flows.

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