The Rise of a Cheap Renminbi

The article addresses the appreciation of the yuan (Renminbi) and China's economic imbalances. According to the text, the country's internal imbalances generate trade surpluses, and the controlled management of the exchange rate allows China to transfer the burden of adjustment to the outside rather than face these problems internally. The article acknowledges that exchange rate adjustment, by itself, does not replace the need for structural reforms in the Chinese economy. However, it concludes that under current conditions, it is unlikely that these structural reforms will advance without a significant exchange rate correction first.