China’s steps to limit the damage from the Greek crisis will necessarily shift the brunt of the economic adjustment to other countries, unless the major trading powers can reach a burden-sharing agreement.
The Euro crisis, rather than reducing the urgency for China to revalue its currency and adjust its trade policy, may in fact require that China react much more aggressively than originally planned.
In recent months, the United States and China have gone through a rough patch in bilateral relations. Yet such setbacks represent a very short period in a much longer timeframe of U.S.-China cooperation.
The widely-held belief among both Chinese and Western observers that China is growing increasingly assertive has the potential to create significant challenges for Sino-U.S. relations.
Although China could easily avoid a banking collapse in the face of rising non-performing loans, that effort would place even more pressure on low-consuming Chinese households and make economic rebalancing more difficult.
Chinese production continues to rise faster than domestic consumption, and even if China allows the renminbi to appreciate against the dollar, a rising trade surplus could lead to another increase in tensions.
The recent flare-up in China’s diplomatic posture towards the United States was not in synch with official policy and ran counter to China’s national interests.
The debate over China's currency propagates dangerous myths about both the Chinese economy and the potential benefits of a more expensive renminbi for the United States.
The risk of economic overheating in China now outweighs that of an economic downturn, and government leaders should be able to withdraw stimulus while maintaining strong growth for the several few years.
The dispute between the United States and China over the value of China's renminbi distracts both countries from more important reforms. Policy makers should prioritize maintaining a collaborative relationship over staging another fruitless debate.