7.22.2005
China Unpegs Itself (NYTimes.com)
By PAUL KRUGMAN
Published: July 22, 2005
Thursday's statement from the People's Bank of China, announcing that the yuan is no longer pegged to the dollar, was terse and uninformative - you might say inscrutable. There's a good chance that this is simply a piece of theater designed to buy a few months' respite from protectionist pressures in the U.S. Congress.
Nonetheless, it could be the start of a process that will turn the world economy upside down - or, more accurately, right side up. That is, the free ride China has been giving America, in which the world's richest economy has been getting cheap loans from a country that is dynamic but still quite poor, may be coming to an end.
It's all about which way the capital is flowing.
Capital usually flows from mature, developed economies to less-developed economies on their way up. For example, a lot of America's growth in the 19th century was financed by investors from Britain, which was already industrialized.
(More ... China Unpegs Itself - New York Times) ¶ 19:36
Published: July 22, 2005
Thursday's statement from the People's Bank of China, announcing that the yuan is no longer pegged to the dollar, was terse and uninformative - you might say inscrutable. There's a good chance that this is simply a piece of theater designed to buy a few months' respite from protectionist pressures in the U.S. Congress.
Nonetheless, it could be the start of a process that will turn the world economy upside down - or, more accurately, right side up. That is, the free ride China has been giving America, in which the world's richest economy has been getting cheap loans from a country that is dynamic but still quite poor, may be coming to an end.
It's all about which way the capital is flowing.
Capital usually flows from mature, developed economies to less-developed economies on their way up. For example, a lot of America's growth in the 19th century was financed by investors from Britain, which was already industrialized.
(More ... China Unpegs Itself - New York Times) ¶ 19:36
