The writer is research associate at Oxford university’s China Centre and at Soas. He is also a former chief economist at UBS
Recent speculation about a significant devaluation of the still closely managed renminbi looks rather fanciful given that China runs a large manufacturing trade surplus and a balance of payments surplus of about 2 per cent of GDP. And that is probably understated.
Yet Japan’s surplus is larger, and this has not stopped the yen suffering a deep slump. China could follow suit. The strong dollar is partly the reason but in China, the main story is the persistent decline in interest rates towards zero, domestic economic and financial circumstances, and a policy conundrum.
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