China's Trouble: Lots of Dollars, Little Sense

Krugman: Beijing knows it's in trouble, remains tied to old ills
By Gabriel Winant,  Newser User
Posted Apr 3, 2009 12:39 PM CDT
Xiaochuan Zhou, governor of China's Central Bank, speaks during a conference at the 50th meeting of the Inter-American Development Bank in Colombia, March 28, 2009.   (AP Photo)
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(Newser) – China’s recent call for an alternative to the dollar as a reserve currency underlines how much trouble the country is in after years of stockpiling greenbacks, Paul Krugman writes in the New York Times. The Chinese, long unwilling to let the yuan float freely on foreign exchanges, are signaling that they need to be rescued from their own mistakes, but “that’s not going to happen.”

“Two years ago, we lived in a world in which China could save much more than it invested and dispose of the excess savings in America,” Krugman continues. “That world is gone.” And Beijing's insistence that old habits should continue anyway show “that China hasn’t yet faced up to the wrenching changes that will be needed to deal with this global crisis.”