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Pressure on china to revalue its currency was mounting EU and even Japan to pressurized China to revalue its currency had joined US Recall that china received plaudits during the Asian crisis for maintaining stable exchange rate policy and avoiding competitive devaluation Then why Chinese currency was now blamed for global imbalances Worlds dependence on US for growth has been increasing and it played disproportionately larger share in world growth throughout 90s Japan has long its status as growth engine and EUs economic growth has been sluggish But the equation has somewhat changed lately For the first time all three major drivers US EU Japan of world economic growth are suffering In this situation china and to some extent India have emerged as bright spots showing high growth rates If one were to go by official growth figures of china over last two decades it represents the most stunning growth story in human history UNDERSTANDING CHINAS ENIGMATIC GROWTH Various factors that have contributed to Chinese growth 1 Conducive investment environment - fixed exchange rate system preferential taxtreatment 2 Cheaplabor 3 World-class infrastructure etc All these factors over period of time have made China-the worlds factory Major MNC are shifting their production base to china enabling them to drastically reduce their cost of production Central banks today are worried more about deflation than inflation Exports and heavy investment by government in infrastructure have been major drivers of chinas economic growth According to observation made by Stephen Roach of Morgan Stanley 65 of chinas growth could be traceable to export during last 3 years While investment share of GDP rose to 42 in 2002 which is not good for the long run sustenance Domestic demand has to play larger role BEIJINGS DILEMMA WHAT IF CHINA WERE TO REVALUE THE YUAN Export has been one of the major
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