The public in China would be satisfied, only exporters would suffer and the currency surplus accruing to the Chinese government would diminish. A large rise would be disastrous, as Premier Wen says,but10percentayearshouldbetolerable.
Since the Chinese government is the direct beneficiary of the currency surplus, it would need to have remarkable foresight to accept this diminution in its power and recognize the advantages of coordinating its economic policies with the rest of the world. It needs to recognize that China cannot continue risingwithoutpayingmoreattentiontotheinterestsofitstradingpartners.
Only China is in a position to initiate a process of international cooperation because it can offer the enticement of renminbi appreciation. China has already developed an elaborate mechanism for consensus building at home. Now it must go a step further and engage in consensus building internationally. This wouldberewardedbytherestoftheworldacceptingtheriseofChina.
Whether it realizes it or not, China has emerged as a leader of the world. If it fails to live up to the responsibilities of leadership, the global currency system is liable to break down and take the global economy with it. Either way, the Chinese trade surplus is bound to shrink but it would be much better for Chinaifthathappenedasaresultofrisinglivingstandardsratherthanaglobaleconomicdecline.
The chances of a positive outcome are not good, yet we must strive for it because in the absence of international cooperation the world is heading for a periodofgreatturbulenceanddisruptions.