Businessweek on China's monetary dilemma: "something’s wrong when an interest rate reaches almost 70 percent"
James McGregor
James McGregor is an American author, journalist and businessman who has lived in China for three decades.
For those of us who are confused by what is happening with China's monetary policy and trying to understand why the experts are so concerned, here is a very clear and concise overview from Bloomberg Businessweek.
It looks like China has some difficult choices to make.
What Xi is running up against is what international economists call the trilemma, or the impossible trinity. It says that a country can’t have all three of the following things at once: a flexible monetary policy, free flows of capital, and a fixed exchange rate. They fight one another. As soon as China started allowing free (or at least freer) flows of capital, it was inevitable that it would have to give up on one of the other two objectives. If it wanted to keep the yuan from falling, it would have to raise interest rates higher than is good for the domestic economy, essentially giving up on setting an appropriate monetary policy. Or, if it wanted to set interest rates as it pleased, it would have to allow the yuan to sink.
经理
9 年什么情况？
kerja sawah di sawah orang
9 年i transfer to rek mrs
Tecnologo
9 年Ann, the first one among the many erotemes of your post: ask [yourself...] why US$ are ...US$...; a comparison with India in the next 15 years is probably much more appropriate...;-]
Short term rates are a reflection of currency short-squeezes, not long term value relationships. What we are seeing now is a deja vu of many of the strains that played out in the late 1990s. HIBOR was over 100% in the late 1990s. Roll the clock forward 18 years...China's economy today may be more highly levered than that of the U.S., but both have pushed the envelope on leverage and, in my view, the salient difference is that the U.S. prints dollars. In the medium term, the U.S. has more experience with value creation but it's all in the past. China's track record on value creation may be in front of it--you know this story much better than I--but I believe time is on China's side.