Zoo Station

The G7 countries met last Friday in Washington. Also invited was China – making the G7 less anachronistic. However, as The Economist notes, China’s invitation might be as much due to it’s inflexible currency policy (China has maintained a peg of 8.28 yuan to a dollar since 1995) as it is for the country’s increasing economic importance. If China heeds to the demands of the G7 countries to move to a more flexible currency regime, the American deficit would surely look less menacing. This, however, is unlikely to occur soon. China, like it had said last year, has promised to follow a steady road towards a market oriented exchange policy although it backed out of giving any timeline. The dollar promptly rose. I suspect John Snow (“We’ll talk to the Chinese about currency flexibility and the need to accelerate the path to it.”) is not pleased.

p.s. The article also mentions the arguments for and against debt relief and Bono’s speech last week. A discussion of debt relief is perhaps an issue for another post – any takers?