Geng Xiao argues that China should adopt a policy of “inflation first, currency appreciation second.” Both factors are needed to help balance China’s economy.
Adjusting the exchange rate alone as a response to American pressure will only produce short term gains, while increasing inflation alone cannot rebalance currency disparities without posing serious risk to the economy at large. Development of China’s financial sector would help maintain a stable rate of inflation, and prepare the Chinese economy for measured currency revaluation.
I question whether the U.K. and EU will become political and economic rivals, as geography, history, financial interests, security concerns, and shared values will necessitate continued close cooperation in some form for the foreseeable future. My bigger concern is the all-consuming nature of Brexit, which could prevent the U.K. especially and the EU from engaging effectively against international rivals. Brexit already dominates debates in London, with a divided Cabinet and parliament having limited bandwidth to engage on global challenges. Even if the U.K. parliament ratifies a Brexit deal, the two sides must then embark on equally complicated and domestically contentious negotiations about their future relationship. In some form, Brexit will afflict Europe for years and risks detracting attention from emerging threats.