The Need for a Higher Valued Chinese Currency

An outflow of capital from China, and the trade deficit it has created for rich countries and especially the United States, has led to an enormous gap in demand. The key route to reducing the trade deficit is a lower value of the dollar, which would require China to decrease its foreign reserves. As negotiations work, this would mean the United States would have to make concessions in other areas of the bilateral relationship.

Dean Baker, Co-director, Center for Economic and Policy Research via CHINA US Focus http://ift.tt/29nyHwj