Nobel Prize-winning economist Paul Krugman said global economic growth would be about 1.5 percentage points higher if China stopped restraining the value of its currency and running trade surpluses.
Krugman said China’s currency policy has a “depressing effect” on economic growth in the US, Europe and Japan, as measured by GDP. If China’s currency, the yuan, were not undervalued, it would have a “significant” impact on the global recovery, he said.
“If we could get some change in China’s currency policy, it would help the world,” Krugman said at an Economic Policy Institute event in Washington on Friday.
The US has refrained from calling China a currency manipulator, while also criticizing its lack of flexibility in foreign exchange policy.
The Chinese central bank has kept the yuan at about 6.8 per US dollar since July 2008, as part of stimulus efforts to help China weather the global recession.
The IMF predicted in January the world economy will expand 3.9 percent this year after a contraction of 0.8 percent last year. China’s economy was forecast to grow 10 percent this year and 9.7 percent next, the IMF said.
Krugman said the world economy wouldn’t be hurt, and could benefit, if China were to sell off a large portion of its dollar-denominated assets.
He said that if China were to sell all of its US investments, it would help the economy by acting as a form of quantitative easing and fighting a “liquidity trap” that has recently been affecting the US economy.
“We should not be afraid of what the Chinese might do if we pressure them to stop this currency manipulation,” Krugman said.
Krugman said the US may need to get more aggressive in its negotiations with China, perhaps by treating the exchange-rate issue as a countervailing duty or other export subsidy.
China’s central bank said a stronger yuan wouldn’t help solve the trade imbalance between China and the US after US President Barack Obama repeated his call for the Asian nation to move to a “market-oriented exchange rate.”
“We do not think a country should rely on others to solve its own problems,” Su Ning (蘇寧), deputy governor of the bank, said on Friday, Xinhua news agency reported.
IN THE AIR: While most companies said they were committed to North American operations, some added that production and costs would depend on the outcome of a US trade probe Leading local contract electronics makers Wistron Corp (緯創), Quanta Computer Inc (廣達), Inventec Corp (英業達) and Compal Electronics Inc (仁寶) are to maintain their North American expansion plans, despite Washington’s 20 percent tariff on Taiwanese goods. Wistron said it has long maintained a presence in the US, while distributing production across Taiwan, North America, Southeast Asia and Europe. The company is in talks with customers to align capacity with their site preferences, a company official told the Taipei Times by telephone on Friday. The company is still in talks with clients over who would bear the tariff costs, with the outcome pending further
A proposed 100 percent tariff on chip imports announced by US President Donald Trump could shift more of Taiwan’s semiconductor production overseas, a Taiwan Institute of Economic Research (TIER) researcher said yesterday. Trump’s tariff policy will accelerate the global semiconductor industry’s pace to establish roots in the US, leading to higher supply chain costs and ultimately raising prices of consumer electronics and creating uncertainty for future market demand, Arisa Liu (劉佩真) at the institute’s Taiwan Industry Economics Database said in a telephone interview. Trump’s move signals his intention to "restore the glory of the US semiconductor industry," Liu noted, saying that
STILL UNCLEAR: Several aspects of the policy still need to be clarified, such as whether the exemptions would expand to related products, PwC Taiwan warned The TAIEX surged yesterday, led by gains in Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), after US President Donald Trump announced a sweeping 100 percent tariff on imported semiconductors — while exempting companies operating or building plants in the US, which includes TSMC. The benchmark index jumped 556.41 points, or 2.37 percent, to close at 24,003.77, breaching the 24,000-point level and hitting its highest close this year, Taiwan Stock Exchange (TWSE) data showed. TSMC rose NT$55, or 4.89 percent, to close at a record NT$1,180, as the company is already investing heavily in a multibillion-dollar plant in Arizona that led investors to assume
AI: Softbank’s stake increases in Nvidia and TSMC reflect Masayoshi Son’s effort to gain a foothold in key nodes of the AI value chain, from chip design to data infrastructure Softbank Group Corp is building up stakes in Nvidia Corp and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the latest reflection of founder Masayoshi Son’s focus on the tools and hardware underpinning artificial intelligence (AI). The Japanese technology investor raised its stake in Nvidia to about US$3 billion by the end of March, up from US$1 billion in the prior quarter, regulatory filings showed. It bought about US$330 million worth of TSMC shares and US$170 million in Oracle Corp, they showed. Softbank’s signature Vision Fund has also monetized almost US$2 billion of public and private assets in the first half of this year,
RSS