Faster growth in the G20 must come through increased demand in advanced nations—beginning with the United States and Germany—rather than agreements about currency appreciations or current account targets.
China’s trade surplus is best understood as part of a regional export surplus, and a revaluation of the yuan will likely not only leave the balance of trade largely the same but might actually hurt economies in the West.
Global growth is stimulated by increased demand, and while China is currently the largest component of global growth due to its strong economy, it is not a major net contributor to growth outside its borders.
With economic activity surpassing pre-crisis levels in developing countries but still lagging in many high-income economies, differences in macroeconomic policy stances are creating tensions that could threaten growth in increasingly important emerging markets.
Assertive Chinese and job-hungry Americans are gearing up for a trade war across the Pacific. Fortunately, cooler heads will likely prevail.
Chinese policymakers looking to learn from Japan's policy missteps should recognize that Japan's lost decade grew out of its failure to implement early and gradual economic adjustment policies, not its decision to reevaluate the yen.
Threats of a currency war hang in the air, but few countries have actually seen their exchange rate appreciate significantly. Major world economies should refocus on domestic policies before the rhetoric turns into reality.
If China is pressured to reevaluate its currency too quickly, it will have to rely on overinvestment to head off rising unemployment, which would exacerbate the fundamental imbalances already present in the Chinese economy.
While China needs to revalue its currency to increase household income, it should do so gradually to avoid devastating its economy and hurting exporters and consumers alike.
European policy makers need to respond to the Great Recession and subsequent debt crisis with far-reaching structural reforms in order to ensure that today’s downturn does not devolve into long-term slow growth and deflationary trends.























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