Europe must look east on the Euro
The main statements of the article “Europe must look east on the Euro” are that the dollar will decline by at least 15-20 per cent on average, whereby this decline should take place mainly against the East Asian countries and the oil exporters. But as China intervenes to block the appreciation of the Renminbi against the Dollar and the other major Asian countries intervene on their own to avoid losing their competitive position against China, the decline of the dollar will take place mainly against the Euro. Therefore, also when the Renminbi appreciates some per cent against the dollar, the depreciation of the dollar outweighed this effect and the Renminbi declined against the Euro, reducing the competitiveness of the Eurozone.
While I understand - as citizen of an European country - the popular opinion that Europe should direct its concerns against China and should try to convince China to implement a more flexible exchange rate policy, my (quite liberal) opinion is that each country should be allowed to implement each monetary policy which it expects to support its economical goals in the best way - whereby of course the country will take also expected actions/sanctions of other countries into account.
When China’s authorities believe that pegging the Renminbi to the US dollar will help China’s economy to grow, they should be allowed to do so, especially as China had 2004 still more than 400 million people living with less than 2$ a day.
By subsidising the export sector with an undervalued currency , China boosts the income generation through export. This increased income may help China to grow also domestically, as it will lead to a certain degree also to an increased domestic demand for goods.
Therefore, if the subvention of the export sector will help the country to grow faster but still in a sustainable way , China’s approach to peg its currency to the dollar at a maybe undervalued exchange rate is understandable...