As the yuan's value rises, the US would demand more revaluations, thus making it unaffordable for the Chinese and world economies. "The point is that the US has not given it a really serious thought."
Ross says economic history shows that the only way for the US to increase exports and jobs is to raise its level of investment. The Americans are famous for their low savings rate while China, Japan and some other countries boast high savings that can be used for investment.
The US suffered job losses because of the global financial crisis and because the savings rate in America was (and still is) very low. "It's very easy to explain the financial crisis in the US: The investment level of the US has not gone up in the past 150 years," he says. "The only way the US could increase its growth rate, which can create more jobs, is to raise the level of investment in its domestic market."
Ross accuses the US of trying to slow down growth of other countries by pressing them to raise the exchange of their currencies and lower their rate of investment. "The two effective means of slowing down an economy are to increase the exchange rate of its currencies sharply and force it to reduce its level of investment," Ross says. "This is what the US did for Japan in the 1970s and in later decades."
"What are the two demands the US places on China? One is to raise the exchange rate of the yuan. The second is to increase the share of consumption," he says. "But the increase in the share of consumption means reducing the share of investment and if China does these two things simultaneously, then its economy would slow down a lot."
Will that benefit China or, more importantly, the world economy?
(Source: China Daily)
