bullish

Ending Deflation in China: Currency Appreciation Can Support Economic Rebalancing Towards Consumers

390 Views18 Feb 2024 14:55
SUMMARY
  • China experienced deflation following the Asian and global financial crises. Western commentators fear that China will fight deflation with a weaker currency that undermines trading partners, including the US.
  • China's reliance on a weak currency to promote economic development has been detrimental to households, while currency appreciation will help structural rebalancing by boosting household spending and reduce deflationary pressures.
  • Yuan appreciation could increase global economic stability by forcing the US to be less fiscally profligate. Trade tensions with the US will also be lowered if China accepts yuan appreciation.
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