Mundell, Eichengreen on China

♠ Posted by Emmanuel in ,, at 10/29/2007 01:45:00 AM
The good folks over at Bloomberg, probably noticing my insatiable appetite for all things relating to China's political economy, sent along a note concerning two podcasts of undoubted interest and importance. For your consideration are two segments from Tom Keene's Bloomberg on the Markets program. To start, Nobel Prize in Economics winner Robert Mundell should be known to everyone as the father of the Euro and current advisor to China on handling the renminbi. (I recently featured a Far Eastern Economic Review article on him as well.) In the podcast, Mundell makes four assertions about China that I do not necessarily agree with:
  1. Lots of capital is being held back in China by outward exchange controls that will likely ensure that the yuan will depreciate not appreciate if floated;
  2. The Chinese banking system is not strong enough to adjust to a slower pace of reserve accumulation;
  3. There is little reason to worry about China's sovereign wealth fund buying up foreign concerns for it doesn't have the management expertise to manage them and it is thus uninterested in taking controlling stakes;
  4. Don't worry either about the currently weak $ as the currency goes through strong /weak cycles.
Listen to Mundell and decide for yourselves. Meanwhile, the Barry Eichengreen interview podcast is also worth listening to. He comes to the opposite conclusion that China will likely revalue the RMB faster. The interview focuses on the IMF's reform agenda, global exchange rate policies, and pressure on China to revalue the yuan. BTW, you can stream these podcasts without leaving the IPE Zone using the Snap tool which also plays video clips. Just hover your cursor over the podcast links and the MP3 player should pop up. Enjoy! [UPDATE: Jonathan Dingel at Trade Diversion beat me to these clips.]