Content from the Brookings-Tsinghua Public Policy Center is now archived. Since October 1, 2020, Brookings has maintained a limited partnership with Tsinghua University School of Public Policy and Management that is intended to facilitate jointly organized dialogues, meetings, and/or events.
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.
Commentary
China: The Correct Sequence Should be Inflation First, Appreciation Second
August 30, 2007