vivian shaw

Welcome to ’10s

Happy New Year! My 2010 started auspiciously, with the most delicious omelette in the history of my eating at Greenpoint Coffeehouse. Airy and savory, with goat cheese and swiss chard. Delicious.

Paul Krugman, economist-columnist for the New York Times, ushered readers into the new year with an article predicting China’s continued economic ascent and impending super powerness, intently criticizing the yuan as artificially devalued and viciously harmful to US recovery efforts from our highest rates of unemployment since the Great Depression.

Here’s the meat of his explanation:

“Unlike the dollar, the euro or the yen, whose values fluctuate freely, China’s currency is pegged by official policy at about 6.8 yuan to the dollar. At this exchange rate, Chinese manufacturing has a large cost advantage over its rivals, leading to huge trade surpluses.

Under normal circumstances, the inflow of dollars from those surpluses would push up the value of China’s currency, unless it was offset by private investors heading the other way. And private investors are trying to get into China, not out of it. But China’s government restricts capital inflows, even as it buys up dollars and parks them abroad, adding to a $2 trillion-plus hoard of foreign exchange reserves.”

Krugman breaks down abstract monetary concepts in a way that’s relatively accessible and knowledge-building for lay readers, which I appreciate from a literacy perspective. However, I have to wonder if loyal readers ever get bored with his frequent rehashing of this topic. I only read Krugman every now and then, but it seems like he and many other economists are fixated on this issue to the point of redundancy. The devalued yuan is incredibly important, but is it still news at this point? Will it remain a a staple of the news cycle until China makes a policy shift, revealing the media’s function as a soft power arm of the US/Euro agenda? Or does the media serve the public by ensuring numerous opportunities to learn up on this topic? We’ll probably find out later this year or in 2011.

A key ingredient, in my opinion, is the issue of how much China cares about its global PR, or to put it in a different way, how dependent its power/strength is on the global community’s rating of its ability to play fair. The scope of this question is tremendously out of my league, but I suspect it’s central to the likelihood of China’s incentive, or lack thereof, to revise policy on the yuan.