Roubini WSJ Interview on Chinese Growth and Its Currency Policy
Yuan Revaluation for China’s Own Sake
By Peter Stein
U.S. lawmakers have put China’s currency policy high up on America’s political agenda. Nouriel Roubini believes it ought to be even higher on China’s economic agenda.
The famously gloomy economist, known in part for his prescient views ahead of the global financial crisis, says China needs to revalue its currency, the yuan, not because failure to do so hurts the U.S. Rather, keeping the yuan artificially low will lead China’s own economy to hit a dangerous “growth wall” in the next two to three years, he said in an interview on the sidelines of the World Capital Markets Symposium in Kuala Lumpur last week.
Mr. Roubini, a professor of economics at New York University’s Stern School of Business, isn’t the only one to assert that China needs to appreciate its currency for its own sake. But amid the election rhetoric flying around Capitol Hill, where the House last week voted overwhelmingly to penalize Beijing over its currency practices, Mr. Roubini is possibly the most economically articulate observer of China to argue the point.
The basis of Mr. Roubini’s reasoning is familiar, and not even contentious: China needs to boost domesticconsumption and reduce its reliance on exports. In fact, China’s official governmentpolicy already embraces that concept. The problem, Mr. Roubini says, is that China’s efforts to promote consumer spending ring hollow while the yuan remains weak. Consumption as a share of gross domestic product, in fact, has fallen to 36% from 45% in the last decade, compared with U.S. levels of about 70%.
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