China Must Be Confronted on Currency
Shackling the yuan to the dollar threatens world economy
By Rob Quinn,  Newser Staff
Posted Oct 23, 2009 5:00 AM CDT
A worker prepares Chinese yuan banknotes at a bank in Suining in southwest China's Sichuan province.    (AP File Photo)
camera-icon View 1 more image

(Newser) – China has been allowed to get away with its outrageous currency policy for far too long and it's time the world did something about it, writes Paul Krugman. The nation has been keeping its currency effectively pegged to the dollar, and this policy will result in even greater trade imbalances as the yuan falls along with the dollar, Krugman writes in the New York Times.

China's currency should be rising in accord with the laws of supply and demand, notes Krugman, but instead it's being devalued by the dollar's drop, siphoning an unfair amount of the demand for goods away from poorer countries and stifling growth. The US has shied away from confronting China over the currency issue, Krugman writes, but "with the world economy still in a precarious state, beggar-thy-neighbor policies by major players can’t be tolerated. Something must be done about China’s currency."