22.02.2016 - China can’t escape its currency bind
China is being forced to choose between capital controls, interest rate independence and maintaining control over the value of its currency. What do bicycles and the Chinese economy have in common? The answer; you can’t have it all. When buying a bike you have three options; cheap, light and strong — but the dilemma is you can only choose two, for example, if you want it light and strong, it won’t be cheap, and vice versa. In a similar vein, as the Chinese government forges ahead with attempts to liberalise its economy, it’s facing the hard reality that it cannot control both interest rates and exchange rates and still have an open capital account. This is often referred to as the impossible-trinity, or trilemma, and no economy is immune...............................................Full Article: Source
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