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|China’s Currency War:
Enemy #1 for Global Economy
|by Bryan Rich
When Brazil’s finance minister said the world was in a currency war, it came as big news to many people — a surprising “new” economic threat. But there’s nothing new about a currency war. Chinahas been waging a war — an economic war — with its currency for a long time.
Over the last 14 years, China’s economy has grown four times as fast as the U.S. economy, and it has quickly soared to become the world’s second-largest. The key to China’s success has been a weak yuan — it’s method of manipulating a sustained advantage over its competitors in global trade.
This strategy of manufacturing an artificially weak currency to corner the world’s export market has led to a massive imbalance in global trade. It was a key contributor to the current economic crisis, and it’s proving to be a key barrier to a sustainable global economic recovery.
Put simply, these global trade imbalances have proven a recipe for more frequent boom and bust cycles.
That’s why the G-20, the IMF, the OECD — all of the major institutions and central banks of the world have been harping on the importance of repairing global imbalances. And all along they’ve been speaking directly to China.