The NYT reports that China's central bank is raising the reserve requirements for banks. It claims that this is being done to give the central bank more money with which to buy dollars in international currency markets, which will keep the yuan from rising.

The article claims that China does not want the yuan to rise because a higher yuan would make its exports less competitive and therefore cost jobs. However, raising reserve requirements will reduce lending, thereby also throwing people out of jobs.

The article also says that China is worried about inflation. If this is true, then the most obvious way to reduce inflationary pressure would be to just let the yuan rise. This would make imports cheaper and also slow growth by reducing exports.

The actions of China's central bank is inconsistent with the motives attributed to it in this article. Either those governing China's central bank are confused about basic economics or the article has inaccurately presented the motives for its actions.

Leave your comments

Post comment as a guest

0
  • No comments found

GuideStar Exchange Gold charity navigator LERA cfc IFPTE

contact us

1611 Connecticut Ave., NW
Suite 400
Washington, DC 20009
(202) 293-5380
info@cepr.net

let's talk about it

Follow us on Twitter Like us on Facebook Follow us on Tumbler Connect with us on Linkedin Watch us on YouTube Google+ feed cepr.net rss feed