Skip to main content

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated Cookie policy, Privacy policy and Terms & Conditions

7d5d2d0446f86f380e303f24_pa3444c.jpg Paul Lachine

China Adjusts

Not long ago, the renminbi was substantially undervalued and China’s trade surpluses were very large. But the situation is changing: forces of adjustment are at work in the Chinese economy, and foreign perceptions need to adjust as well.

BAHRAIN – China watchers are waiting to see whether the country has engineered a soft landing, cooling down an overheating economy and achieving a more sustainable rate of growth, or whether Asia’s dragon will crash to earth, as others in the neighborhood have before it. But some, particularly American politicians in this presidential election year, focus on only one thing: China’s trade balance.

True, not long ago the renminbi was substantially undervalued, and China’s trade surpluses were very large. That situation is changing. Forces of adjustment are at work in the Chinese economy, so foreign perceptions need to adjust as well.

China’s trade surplus peaked at $300 billion in 2008, and has been declining ever since. (Indeed, official data showed a $31 billion deficit in February, the largest since 1998.) It is clear what has happened. Ever since China rejoined the global economy three decades ago, its trading partners have been snapping up its manufacturing exports, because low Chinese wages made them super-competitive. But, in recent years, relative prices have adjusted.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

https://prosyn.org/q0ZQU4B;
  1. elerian122_Peter MacdiarmidGetty Images for Somerset House_bigdatascreentechman Peter Macdiarmid/Getty Images for Somerset House

    Adapting to a Fast-Forward World

    Mohamed A. El-Erian

    The world is going through a period of accelerating change, as four secular developments illustrate. Firms and governments must make timely adjustments, not only to their business models and operational approaches, but also to both their tactical and strategic mindsets.

    2
  2. roubini137_Mikhail SvetlovGetty Images_xi putin Mikhail Svetlov/Getty Images

    The White Swans of 2020

    Nouriel Roubini

    Financial markets remain blissfully in denial of the many predictable global crises that could come to a head this year, particularly in the months before the US presidential election. In addition to the increasingly obvious risks associated with climate change, at least four countries want to destabilize the US from within.

    8
  3. tharoor137_ Hafiz AhmedAnadolu Agency via Getty Images_india protest Hafiz Ahmed/Anadolu Agency via Getty Images

    Pariah India

    Shashi Tharoor laments that the government's intolerant chauvinism is leaving the country increasingly isolated.