www.nytimes.com/2009/11/16/opinion/16krugman.html
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RicKelis since 6 days 1 time 41 minutes, published about 5 days 13 hours 25 minutes
International travel by world leaders is mainly about making symbolic gestures. But let’s hope that when the cameras aren’t rolling Mr. Obama and his hosts engage in some frank talk about currency policy. For the problem of international trade imbalances is about to get substantially worse. And there’s a potentially ugly confrontation looming unless China mends its ways. Despite huge trade surpluses and the desire of many investors to buy into this fast-growing economy, Chinese authorities have kept that currency persistently weak. China’s weak-currency policy exacerbates the problem [of the depressed state of the world economy], in effect siphoning much-needed demand away from the rest of the world into the pockets of artificially competitive Chinese exporters. This problem is about to get much worse. Because for the past year the true scale of the China problem has been masked by temporary factors. Looking forward, we can expect to see both China’s trade surplus and America’s trade deficit surge. Unfortunately, the Chinese don’t seem to get it: rather than face up to the need to change their currency policy, they’ve taken to telling us to raise interest rates and curb fiscal deficits. And I’m not sure the Obama administration gets it, either. The administration’s statements on Chinese currency policy seem pro forma, lacking any sense of urgency. That needs to change. I don’t begrudge Mr. Obama the banquets and the photo ops; they’re part of his job. But behind the scenes he better be warning the Chinese that they’re playing a dangerous game.