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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

(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."

[Images (2)]

[Quotes (2)]

A worker prepares Chinese yuan banknotes at a bank in Suining in southwest China's Sichuan province. (AP File Photo)

A man unwraps a Chinese national flag at a park where Chinese national flags are shown to celebrate the People's Republic of China's 60th anniversary in Beijing. (AP Photo/Alexander F. Yuan)

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In normal times, I’d be among the first to reject claims that China is stealing other peoples’ jobs, but right now it’s the simple truth. - Paul Krugman

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- Paul Krugman

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China Must Be Confronted on Currency