Economist Warns against Blaming China Yuan Revaluation 'Won't Allow the Americans to Export More Goods'
American politicians are calling for China to revalue its currency to help out troubled US exporters. But in an interview with SPIEGEL, a leading German economist has warned that America first needs to make products that people want to buy.
SPIEGEL: China's currency reserves have grown to a breathtaking $2.65 trillion (1.9 trillion) and the imbalance in world trade is growing larger all the time. Can a revaluation of the yuan, as the US is calling for, halt this trend?
Rolf Langhammer: It would be welcome -- and also in China's own interest -- if the yuan exchange rate was more flexible than it has been up to now. China's recent moves in that direction (i.e. the small revaluation since June) are far from sufficient. I would caution against overblown expectations, though. It would hardly be possible to eliminate the global imbalance in that way.
SPIEGEL: Why not?
Langhammer: A weak dollar won't automatically allow the Americans to export more goods. We shouldn't be under any illusions about that. In many cases, companies that are based in the US can't survive on the global market because they don't have innovative products or the qualified workforce required to develop them.
SPIEGEL: Are interventions in exchange rates even capable of eliminating global imbalances?
Langhammer: When China allowed the yuan to gradually appreciate by some 20 percent between 2005 and 2008, there were no signs that this helped US businesses on the global market. The crucial thing is that a country must be well positioned with the range of goods that it wants to export. The US is still lagging well behind in that respect.
SPIEGEL: As opposed to German industry?
Langhammer: Definitely. Germany produces high quality goods that, to a certain extent, are independent of international price competition. To put it bluntly, people outside the European Union who buy a luxury German car or a machine tool don't make that decision based on the exchange rate.
Interview conducted by Alexander Jung.