China Comes to Dinner
The Group of Seven industrialized nations invited top Chinese economic officials to a dinner last Friday. It was about time that China was invited to a G-7 meeting.
The Chinese economy has rapidly become the world's seventh largest. That's good for China in reducing its vast poverty. But the pegging of its currency to an artificially low value means inexpensive Chinese exports are destroying manufacturing jobs from Ohio to Osaka.
The main role of the G-7 nations - the US, Japan, Germany, Britain, Canada, France, and Italy - has been to prevent currency-rate distortions that create imbalances in world trade. The G-7 foresees potential financial troubles, especially with a US trade deficit of more than $500 billion, unless China lets market forces begin to set its currency's exchange rate, thus raising prices of its exports. Most experts say the currency needs an adjustment of 15 to 40 percent.
After the dinner, China merely pledged to "push ahead firmly and steadily" toward making its rate more flexible. Such statements have been heard before, indicating China's Communist Party won't change its way without more foreign pressure.
Napoleon once advised to let China sleep, for when she awakes she will shake the world. Now it's time for the G-7 to wake up and help China stop shaking the world's trade.