China on the Fed

Liu Mingkang – the Chinese bank regulator who attacked Fed monetary policy over the weekend for fuelling the carry trade – is a sharp guy and worth taking seriously. But China would do well to acknowledge that it shares some responsibility for preventing a new wave of asset price bubbles across the emerging world. The best way to deal with capital inflows is to allow your currency to appreciate – but other emerging economies cannot do this, at least to the extent necessary, because China is not allowing its currency to appreciate. Not yet, anyway.

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