China’s overcapacity is a feature, not a bug
Exchange rates are likely to become an issue of widespread international consternation, with China the focus.
Overcapacity is a feature, not a bug, of economies with persistent current account surpluses.
China may have been singled out partly because of its size. China’s dominance in global trade and production has not been seen for a single economy since the US in the 1970s.
Whether reflecting these trends or others, the reality is protectionism does seem to have become more embedded. Once sparked, protectionism is difficult to extinguish.
China faces both cyclical and structural constraints on any efforts to redirect its economy towards domestic demand. Investment and exports are likely to remain the growth engines. This is also likely to keep fanning the flames of protectionism elsewhere.