Morgan Stanley Asia chairman Stephen Roach said a “baseball bat” should be taken to economist Paul Krugman over his call for the US to pressure China into allowing the yuan to appreciate.
“We should take out the baseball bat on Paul Krugman — I mean I think that the advice is completely wrong,” Roach said in a Bloomberg Television interview in Beijing when asked about Krugman’s call, characterized as akin to taking a baseball bat to China.
“We’re lashing out at China rather than tending to our own business,” which is raising US savings, Roach said.
PHOTO: REUTERS
“I’m a little surprised at Steve for saying that,” said Krugman, the Princeton University professor and Nobel laureate in economics, in a telephone interview when asked to respond to Roach. “What I said is actually based on pretty careful economic analysis. We have a world economy which is depressed by China artificially keeping its currency undervalued.”
The debate between the two economists echoes verbal clashes between the nations, with Chinese leaders repeatedly saying that their yuan policy isn’t the cause of the US trade gap. US lawmakers have urged US President Barack Obama’s administration to step up pressure on China for keeping its exchange rate unchanged, a stance criticized as providing an unfair advantage.
Global economic growth would be about 1.5 percentage points higher if China stopped restraining the yuan and running trade surpluses, Krugman said at an Economic Policy Institute event in Washington last Friday. He said the US may need to get more aggressive in its talks with China, perhaps by treating the exchange-rate as a countervailing duty or other export subsidy.
“I’m a little curious what Steve thinks would happen if the US increased savings” without a stronger yuan, Krugman said yesterday.
“Where would the demand” for goods and services come from, he asked. Boosting savings should be done “in the long run,” not now, he also said.
Krugman is “giving Washington very, very bad advice,” Roach said in a later interview when asked to respond to Krugman’s reaction to his remarks. “I totally reject his idea that savings is bad.”
The US trade deficit is due to a shortfall of savings, and any attempt to address the bilateral gap with China would just cause a shift to another country as Americans kept up their spending, Roach said. He added that while Krugman and he have been in agreement for years, they are in total disagreement right now.
“What the world needs is a shift in the mix of saving,” Roach said in a further e-mail. While China has a “major surplus saving imbalance,” it’s “highly debatable” whether it’s because of the yuan stance. Efforts to boost Chinese consumer spending will be a more effective way to address the issue, he said.
The US ambassador to China, Jon Huntsman, this week said that the “recent turbulence” between the world’s largest and third-biggest economies was part of “the natural cycle” and wouldn’t harm long-term ties.
“I am convinced that blue skies are already on the horizon,” Huntsman said on Thursday in a speech at Tsinghua University in Beijing.
Meanwhile, China yesterday said it was sending an envoy to Washington to try to ease trade frictions as its currency regime comes under fire, warning that threats from US legislators could stifle room for progress.
The announcement, along with conciliatory comments by China’s commerce ministry, appeared aimed at cooling an increasingly rancorous dispute that has US senators threatening to slap duties on Chinese products if Beijing does not allow the yuan to rise.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
LANDSLIDES POSSIBLE: The agency advised the public to avoid visiting mountainous regions due to more expected aftershocks and rainfall from a series of weather fronts A series of earthquakes over the past few days were likely aftershocks of the April 3 earthquake in Hualien County, with further aftershocks to be expected for up to a year, the Central Weather Administration (CWA) said yesterday. Based on the nation’s experience after the quake on Sept. 21, 1999, more aftershocks are possible over the next six months to a year, the agency said. A total of 103 earthquakes of magnitude 4 on the local magnitude scale or higher hit Hualien County from 5:08pm on Monday to 10:27am yesterday, with 27 of them exceeding magnitude 5. They included two, of magnitude
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique