Author: Ronald I. McKinnon, Stanford University

In the debate on whether China should appreciate its currency or keep it stable as I argue, it’s worth going back to some basics to clear things up.

For a ‘home’ country, consider the identity from the national income accounts:

X – M = S – I = Trade (Saving) Surplus

where X is exports and M is imports (both broadly defined), and S is gross national saving and I is gross domestic investment. Read the rest of this entry »

Author: Peter Yuan Cai, ANU

China has been criticised in some quarters as the party-spoiler at last year’s Copenhagen Climate Change Summit. Its steadfast refusal to allow international monitoring of its emission level led to a collapse in reaching a meaningful international agreement. The earlier euphoria over China’s far-reaching announcement on emission reduction targets had all but disappeared. It seems that many commentators believe that China is pursuing an economic development strategy at all costs.

But there are also voices emanating from China that strongly urge Beijing to take this historic opportunity to tackle the challenge of climate change and assert China’s global leadership in green and renewable technologies. One of the leading voices from the chorus is Hu Angang of Tsinghua University. Read the rest of this entry »

Author: Ronald I. McKinnon, Stanford University

Speculation is rife about when, not just if, China should exit from its policy of stabilising the yuan/dollar rate. Investment banks and hedge funds are making their usual one-way bets. Chinese officials are being closely quizzed for possible hints as to when the great event is going to happen. Governor Zhou Xiaochuan of the People’s Bank of China (PBC) is playing the role of Hamlet. Recently he told a press conference that the currency peg was a ‘special measure’ to help China weather the financial crisis. ‘These policies sooner or later will be withdrawn’. In seeming contrast, Premier Wen Jiabao declaimed on March 5, ‘We will continue to improve the mechanism for setting the renminbi and keep it basically stable at an appropriate and balanced level’.

But must China ever appreciate? Read the rest of this entry »

Author: Peter Drysdale

Over the horizon, a storm in US-China relations is gathering around the question of whether China is deliberately undervaluing its currency, the renminbi, against the US dollar, giving it an unfair competitive edge in US markets and causing high levels of American unemployment and current account surpluses. Most economists would accept that there was some measure of undervaluation of the Chinese currency (how much is a more difficult question on which to get agreement). But few would argue that appreciation of the Chinese currency would solve the American woes of which it is supposed to be the cause.

In the feature essay today on this question, Yiping Huang argues that appreciation of the renminbi is certainly on the Chinese economic policy agenda, but he warns, for a number of reasons, that sharp and sudden Chinese appreciation is likely to do more harm to America and the global economy than it would do good, and that it certainly would not alone solve the problems in America that it is supposed to be causing. Read the rest of this entry »

Author: Yiping Huang, Peking University and ANU

Paul Krugman is one of the international economists I most respect. He is a towering figure in the study of international trade. But his understanding of some international economic policy issues is, to put it generously, naïve. In fact, were the Obama administration to follow his policy advice, the world economy could encounter more serious difficulties, if not another recession, in the years ahead.

In the year 2010, Krugman suddenly found a new and passionate interest in China’s exchange rate policy. Read the rest of this entry »

Author: Peter Yuan Cai, ANU

On January 27, the Chinese State Council announced the establishment of China’s National Energy Commission under the leadership of Premier Wen Jiabao and the vice-Premier and his heir-apparent, Li Keqiang.  This announcement came as a much-anticipated move by Beijing to coordinate and devise a comprehensive national energy policy.

The members of this commission certainly reflect that grand ambition. They are an all-star cast of the most important and influential ministers from the State Council such as that of the National Development and Reform Commission, Ministry of Finance, and Ministry of Foreign Affairs. Read the rest of this entry »

Author: Peter Yuan Cai, ANU

The 2009 arrest of Rio Tinto executive Stern Hu was a watershed event in the Sino-Australian relationship. Beijing’s unexpected intervention in the name of national security demonstrates not only how grave were perceptions of its disadvantage in the iron ore trade but also the murkiness of its laws regarding state secrets and the operation of the market. Determined intrusion from Beijing, especially by the Chinese intelligence services, could only happen with the blessing of top echelons of China’s political process.

But what could have made the Chinese government take such dramatic action at such a highly sensitive time in the iron ore negotiations and given the broader global ramifications that an intervention like this would inevitably have? Read the rest of this entry »

Author: Sourabh Gupta, Samuels International

On February 18th, President Obama personally welcomed His Holiness the Dalai Lama to the White House, drawing the predictable ire of the Chinese leadership. As if in response, on March 1st, Beijing named its hand-picked Panchen Lama to its top political advisory body, the Chinese People’s Political Consultative Conference. In 2013, it is speculated the young lama will be elevated to the prominent political position of vice-chairmanship of the National People’s Congress. With Beijing gradually moving towards engineering a similar schism in the revered institution of the Dalai Lama by way of issuing regulations that purport to manage the reincarnation of living lamas, an altogether more purposeful negotiating approach by the Dalai Lama vis-à-vis Beijing is imperative.

Foremost in this regard is the need for His Holiness to match rhetoric with action as he goes about securing an enhanced autonomy arrangement for the Tibetan people. Read the rest of this entry »

Author: Andrew Kipnis, ANU

A household survey I undertook in China in 2005 and 2006 revealed that all of the families surveyed wanted their child to attend university.The sample included a representative number of students from wealthy and relatively impoverished families and of students with above- and below-average academic records. Most of the people I spoke to were shocked that I could even ask such a question. ‘Of course’, or ‘Doesn’t everybody want that?’ were common replies.

The educational desire revealed by this survey is an important social fact about contemporary China. It influences household and national economic priorities, strategies for political legitimation, birth rates, ethnic relations between Han and non-Han groups, gender and family relations and much more. Read the rest of this entry »

Author: Jerome Cohen, NYU

The most formidable challenge to China’s establishment of a credible ‘rule of law’ is neither the quality of its legislation nor the professional competence of its judges, prosecutors, lawyers and police. Laws and the skills of those who apply them have both witnessed substantial progress in the People’s Republic during the past three decades.

The real challenge to the administration of justice in China is, rather, the undue intrusion of politics and, even more broadly, of ‘guanxi’, the network of interpersonal relations of mutual protection, benefit and dependency that is one of the enduring hallmarks of Chinese society. Read the rest of this entry »

Author: Kam Wing Chan, University of Washington

Yes it’s true – hukou (household registration) reform is again back in vogue in China’s ‘post-crisis’ conversations. Premier Wen Jiabao has been talking about it and, unusually the catch phrase has also been placed in the first ‘Central Document’ of 2010. Following the lead of these two sources, hundreds of newspaper articles and commentaries have opined on it in the last few weeks. On March 1, 13 big-city newspapers from 11 provinces in China also made a rare joint appeal for accelerating reform of the hukou system in a co-signed editorial. In sum, the issue is firmly in the spotlight, and hopes have been raised for some real hukou reform.

The hukou system is a big deal in the People’s Republic.  For the past 52 years, the system has served to segregate the rural and the urban populations, initially in geographical terms, but more fundamentally, in social, economic and political terms. Read the rest of this entry »

Author: John Hemmings, RUSI

One thing is apparent: the great love affair between Europe and China is over.

Here in London and throughout the other major capitals of Europe, Copenhagen was the final straw for European policy-makers who advocated engagement with China, with their ideal of building China into the global order on ice. As Francois Gotement of the European Council on Foreign Relations notes, before Copenhagen, European thinkers still believed that they could use soft power to influence China on a host of issues that Europe believed were mutual to both. After Copenhagen, European attitudes have hardened and governments are reconsidering their approach to China. Read the rest of this entry »

Author: Peter Drysdale

The global financial crisis has brought with it big changes in the international economic system. The response to the crisis has seen the emergence of the G20 as the main locus of international economic governance and a cession of authority from America and the old industrial powers (the G7 economies) to the emerging powers in Asia and elsewhere. The role of the US dollar as the world’s primary international currency is also under question, as the growth of US deficits that are necessary to sustain that role has begun to corrode confidence in the value of the dollar.

As the big new kid on the block, China plays into everyone’s thinking about what to do next. Read the rest of this entry »

Author: Yiping Huang, Peking University and ANU

The global financial crisis could mark the beginning of the end for the US dollar’s dominance over the global economy.

But the US dollar will not leave the global stage in the foreseeable future. It will remain one of the world’s most important currencies for many years to come. But the difficulties in maintaining the US dollar’s role as a global reserve currency are large, and are best characterised by the ‘Triffin Dilemma’. Read the rest of this entry »

Author: Ron Huisken, ANU

China’s fierce reaction to Washington’s recent confirmation of a US$6.4 billion arms deal with Taiwan was pre-meditated, not spontaneous. The deal itself has been around since 2001, and it was an open secret that the recent announcement was a matter of when and not if. This issue played out alongside a subsequent confirmation that President Obama would meet the Dalai Lama in his capacity as Tibet’s spiritual leader, a development that Beijing warned would threaten trust and cooperation with the US.

China and Taiwan have notched up some significant gains in the direction of normal dialogue and freer economic interaction since President Ma took over in Taipei in May 2008. Many commentators assessed that the ‘Taiwan question’ seemed to be more securely quarantined than ever. Read the rest of this entry »