The United States has no right to blame China for its own economic problems, says Axel Merk, president of Merk Investments.
He says that is especially true in light of the fact that China is financing so much of the growing U.S. debt burden. The Asian nation is the biggest foreign holder of U.S. Treasuries, with $889 billion.
Many government and business officials have attributed the massive U.S. trade deficit to China’s reluctance to let the renminbi appreciate.
By doing that, "You're only shooting yourself in the foot,” he told Yahoo. That stance amounts to protectionism, he says.
“Our problems are our own making. The U.S. should be pursuing a strong dollar policy. But at the same time, China should do the same thing."
By the same thing, he means a stronger Chinese currency, known as the yuan or renminbi. “We believe it would be in China’s best interest to do so, mostly to combat domestic inflation,” Merk said
“Inflationary pressures have been rampant in China.” And the ways in which the government has responded aren’t as effective as letting the currency rise, he says.
An appreciating currency will also help boost Chinese demand, Merk argues.
Nobel laureate economist Paul Krugman is one who places the blame on China’s shoulders.
“China’s policy of keeping the renminbi undervalued has become a significant drag on global economic recovery,” he wrote in The New York Times. “Something must be done.”
Krugman recommends threatening a surcharge on Chinese imports.
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