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Tags: Barrons | Asia | currency war | dollar

Barron's Arnold: China Currency War Would Be Bad for Asia

By    |   Saturday, 22 November 2014 12:06 PM EST

China has often acted to depress its currency and thus spark exports in recent years, and Barron's writer Wayne Arnold, says it soon may do so again.

Europe's economic weakness is a problem, he writes. China depends on Europe to absorb about 16 percent of its exports, and China’s exports there rose almost 12 percent in the first nine months of 2014.

But the eurozone economy grew only 0.2 percent in the third quarter from the second.

Meanwhile, in Japan, GDP contracted 1.6 percent in the third quarter.

That has both the European Central Bank and the Bank of Japan in heavy-easing mode.

"With [ECB President Mario] Draghi and [BOJ Gov. Haruhiko] Kuroda torpedoing China’s exports with bales of currency, Beijing may feel compelled to fire back," Arnold writes.

"All this money-printing would mean even more credit to Asia’s smaller economies and its weakest borrowers. But to those hopeful this brewing currency war would be good for Asia’s economies or real stock-market returns, a word of advice: curb your enthusiasm."

Komal Sri-Kumar, president of consulting firm Sri-Kumar Global Strategies, says the currency wars of recent years have done little to boost global economic growth, and nations would do better to adopt structural economic changes, says

The dollar hit a seven-year high against the yen and a two-year high against the euro earlier this month.

"Unfortunately, playing with exchange rates is a zero-sum game," Kumar writes in the Financial Times. "Any benefit to the depreciating country would be fleeting as trading nations fight back with similar measures."

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Finance
China has often acted to depress its currency and thus spark exports in recent years, and Barron's writer Wayne Arnold, says it soon may do so again.
Barrons, Asia, currency war, dollar
281
2014-06-22
Saturday, 22 November 2014 12:06 PM
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