The NYT reports on how rising prices and wages in China are dampening demand for its exports. The article presents rising prices in China as an alternative mechanism to a revaluation of the yuan (devaluation of the dollar) for reducing the U.S. trade deficit with China.

While the assessment in the article is largely anecdotal, if it is correct then its suggest that those who advocated a higher yuan as a cure to the trade deficit were correct. The NYT and other media outlets had generally presented this as a debatable point. It would have been worth noting that those who argued that trade would not respond significantly to changes in relative prices appear to be wrong.

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