(James Saft is a Reuters columnist. The opinions expressed are his own)
By Jim Saft
HUNTSVILLE, Ala., June 22 (Reuters) – Asked about 175 years after the fact what he made of the French Revolution, Chinese Premier Zhou Enlai is said to have thought for a moment and concluded: “It is too soon to tell.”
Tell a U.S Congressman up for reelection or an unemployed auto parts worker in Ohio the same thing about China’s new policy to give the yuan more latitude in how it trades against the dollar and, once you’ve picked yourself up off the ground, you’ll have a different answer.
China on Saturday said it would end the yuan’s currency peg to the dollar, allowing it to trade more freely. It also made clear that no big move was forthcoming, preparing the way instead for “gradual” appreciation.
From a Zhou Enlai-like Olympian perspective this is a move in the right direction and, probably, helps to set the stage for a slow-moving but profound transformation in China’s economy and how it interacts with the rest of the world.
This is positive on many levels; it spreads the effects of Chinese growth more widely, it helps, at least a little, to rebalance global trade and, though they won’t be thankful for it, it gives U.S. consumers one more reason to not stuff itself with subsidized goods they so manifestly cannot afford.