CIAO DATE: 09/2009
September 2009
Belfer Center for Science and International Affairs, Harvard University
A higher Renminbi will have two advantages: for the United States, it will help to equilibrate the past trade imbalance; for China, it will stimulate consumption (and enhance imports). It will therefore help China switch from a purely exporting strategy to one that maintains domestic growth through internal consumption. The goods that were to be sent abroad can now be consumed by an increasingly middle class nation at home. These steps will bring China and the United States closer economically and increase international stability. However, unless the military-security relations of the two countries improve, this will not be a sufficient remedy for the two nations' long term problems.
Resource link: Improving U.S.-China Relations: The Next Steps [PDF] - 428K