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Richmans' Trade and Taxes Blog
Calla Wiemer misunderstands Chinese mercantilism in Wall Street Journal
In tthe January 7 Wall Street Journal (Don't Revalue the Yuan Yet) Calla Wiemer argues that China should continue to peg the yuan to the dollar. Weimer is an associate professor of economics at Claremont McKenna College and a visiting scholar at UCLA's Center for Chinese Studies. She wrote:
Yet the exchange rate isn't a relevant factor in achieving a sustainable rebalancing in China's foreign trade. A surplus of exports over imports is simply the external manifestation of an excess of saving over domestic investment. Export revenues not spent on imports are used to acquire foreign assets, which represent Chinese saving invested abroad.
Ms. Wiemer may be an associate professor of economics and an expert on China, but she fails to understand Chinese economic policy. The high savings rate in China is the result of dollar mercantilism, not the cause. She could get an overview of dollar mercantilism in our book, Trading Away Our Future, or she could read Peking U. economics professor Heng-Fu Zou's 1997 paper "Dynamic Analysis of the Viner Model of Mercantilism" (discussed in Chapter 1 of our book).
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