China's Exchange Rate Controversy: A Balanced Analysis

A noted American authority on China's economy and monetary policy presents a statistical as well as theoretical analysis of a variety of perspectives on the controversy surrounding China's currency, basing his paper on both. The author provides the historical background and comprehensive summaries, focusing on different viewpoints about whether China's currency is undervalued, and thus may contribute to global imbalances. In the paper, he divides observers involved in the controversy into two main camps, namely the ones who find China's trade balances to be sensitive to price effects through exchange rate adjustments and those who emphasize other factors as bearing the responsibility for China's large surpluses, including the U.S. credit bubble emerging before the global financial crisis, as well as a version of Dutch disease.     

“Relying on America”: The CPI’s Propaganda in China and Its Influence on China’s Pursuit of a New National Identity before the May Fourth Movement*

At the beginning of the 20th century, American officials, newspapermen, and businessmen in China promoted and participated in the establishment of a branch of the Committee on Public Information (CPI) in China. The purposes of the China station were to compete with other foreign states seeking influence in China, to promote American values and to eventually lead China down an “American” path. The CPI China station built an image of America as a friendly country which offered political and economic assistance and held a leading position in the new postwar order, an example which China could use for its own development. Chinese people were quick to respond to this propaganda as they wanted their concerns to be addressed at the Paris Peace Conference and sought to reform their national identity. The idea of a Wilsonian international order gained support in China through effective propaganda. After the diplomatic defeat in Paris, however, some Chinese began to consider a path very different from that of America. The CPI’s promotion of a particular development path for China and new world order had various effects on the country. The propaganda came at a time when the Chinese were searching for a new national identity and gained support from many groups. In addition, the Chinese people were not passive listeners of the propaganda and did not blindly accept the information that was “fed” to them.