Alternatives to revaluating the yuan

The debate on how to correct the trade imbalance between the United States and China is focused on increase: How to increase US exports and savings and how to increase Chinese imports and consumption.

A big part of the debate, especially in the US, is focused on China's currency, which US leaders allege is undervalued. The Americans want China to revalue the yuan considerably in the hope that it would lead to an increase in US exports and employment.

Chinese leaders differ. They regard the US pressure to revaluate the yuan and Washington's protectionist measures as unfair and detrimental to China's development. They place emphasis upon structural and institutional reform to increase Chinese consumption and make domestic investment more efficient.