Vietnam appears to be taking a page out of China's post-WTO playbook by intervening to keep its currency weak and its exports strong.
Greenberg Center for Geoeconomic Studies
Asia's Challenge to the Global Economy
Project Expert
About the Project
Asia is one of the world’s most economically dynamic regions. But growing economic and financial inter-linkages between Asia and the world also have created significant tensions—with President Trump notably complaining that trade with China is a “bad deal” for the United States. and calling for significant changes to the underlying economic and financial relationship. Understanding the sources of this tension consequently is a critical challenge. One neglected reason for Asia’s large global trade surplus—and the associated bilateral surpluses with the United States is the high underlying level of savings of many East Asian economies. That excess savings corresponds to a low level of consumption—and a tendency to rely either on credit or exports to shore up growth. Asia’s large savings surplus—the savings surplus is economically equal to the current account surplus—fell after the global crisis, but it subsequently has risen and is now approaching its pre-crisis high as a share of world GDP. My recent discussion paper, “The Return of the East Asian Savings Glut,” reviews the sources of Asia’s savings glut and proposes a range of policies for bringing these countries’ uniquely high savings rates down. Ongoing work looks both forward and backward, seeking both to provide a better assessment of the impact of China’s World Trade Organization (WTO) accession fifteen years ago and to evaluate how U.S. foreign economic policy toward major Asian economies could evolve in the next several years. Careful tracking of the foreign exchange intervention of China and other Asian economies provides the foundation for much of this analysis, as well as a resource for journalists, academics, and policymakers.
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China's currency is getting awfully close to some key levels, levels where in the past China has resisted further depreciation. The signals China sends from here on will be critical.
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This one is for my currency trading friends...
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A deep dive into the details of China's balance of payments over the last few quarters of data. During the dollar's depreciation in 2017 and the first quarter of 2018, it looks like China was adding to its official assets once again—though the growth largely came from the state banks.
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The best way of painting a more accurate picture of the economic relationship between China and the U.S.? Add in data on U.S. exports to Hong Kong.
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Just how important have foreign inflows been to the Treasury market?
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China's current account surplus is almost certainly about $100 billion larger than officially reported, and the falling current account surplus masks a persistent manufacturing surplus.
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A short review of the March U.S. trade data and a lot of speculation about the arc of the Sino-American economic relationship in light of the non-negotiability of Made in China 2025.
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The strange case of Taiwan and its life insurance industry.
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East Asia (China, Japan, and the NIEs) ran a $600 billion current account surplus in 2017. "Official" (central bank and sovereign fund) outflows accounted for about half of that. Asia's foreign exchange market intervention isn't as overt as it once was, but also hasn't entirely gone away.
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Reserve growth stopped as private investors in Europe and Japan started buying a lot of the rest of the world's bonds.
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Up until 2014, the growth in central bank dollar reserves closely mapped to the increase in U.S. net external debt. The past few years have been different: for the first time in a long time, yield-starved private investors in Europe and Japan, not emerging market reserve managers, financed the United States' external deficit.
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China's balance of payments data doesn't show any material increase in the pace of offshore lending.
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The Trump Administration should be giving Korea a hard time for its return to foreign exchange market intervention in January 2018.
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The Treasury's April foreign exchange report should be interesting. Thailand hasn't been included in past foreign exchange reports. Yet it is likely to meet all three of the criteria set out in the Bennet Amendment for a finding of "manipulation."
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The ECB has almost certainly had a bigger impact on U.S. rates over the last three years than the PBOC, without buying (or selling) any Treasuries.
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Korea didn’t stop the won from appreciating through 1090 (its intervention level in 2016); Taiwan seems to be blocking any move through 30.
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Arguing China’s credit growth is too high in effect is arguing that the post-crisis fall in China’s external surplus isn’t sustainable.
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Abe's consumption tax hike stalled what until then had been a demand led recovery, leading to a three year period with no growth in domestic demand.
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Analysis of the September intervention proxies for China and q2 Chinese balance of payments data.
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Giving macroeconomic policy advice to a country that saves 46 percent of its GDP is hard. Imprudent domestic policies help limit large external (trade) imbalances, and more prudent domestic policies could result in a return to large external imbalances. Policy changes to reduce national savings are critical.
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Most countries intervene to limit appreciation, not directly to depreciate their currency. And limiting appreciation is a problem when the country has a large external surplus.
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Korea's macroeconomic policies have had a greater impact on its pattern of trade than any free trade agreement.
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No sign of pressure on China's exchange rate regime in the June intervention proxies. Overall intervention in the second quarter is back at pre-August 2015 levels.
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Some thoughts on how China's state banks may have funded their growing external loan portfolio
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Comments on an important new Federal Reserve Working Paper by Anna Wong
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The proxies for Chinese intervention in May do not show any significant reserve drain
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The return of the "fix" doesn't answer the more fundamental question of how China intends to manage its currency.
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Singapore looks to have resumed intervention in the foreign exchange market
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Chinese reserves appear to be stable over last three months.
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