After Cancun, it is China's forex policy

AFTER CANCUN, the next hot issue in international forums could well be China's exchange rate policy. Rather more generally, the exchange rate policies of all countries which actively intervene in forex markets to depress their own currencies and in the process build their forex reserves. India does not appear so far to have come on the radar screen of the G 7 (excluding Japan) which has now begun a systematic campaign against interventionist forex policies.

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The flare-up over exchange rate policies once again shows how inextricably economics is linked with politics. It cannot be otherwise as both economics and politics are ultimately concerned with people in the ordinary business of life. And current forex rates policy, say in China, seems to be having a noticeably adverse impact on jobs in the G 7 countries — particularly in the U.S. and the Euro zone. And, of course, exchange rate adjustments are seen as a palliative (even if only for the short-term) to the problem of jobs destruction in the U.S. and the Euro zone.