External Asymmetries Continue To Build

August 2008 | Economic Analysis

China's massive trade surplus will continue to pose medium-term risks to macroeconomic stability, as rampant liquidity growth inflates asset prices. Moreover, an undervalued exchange rate continues to attract speculative capital, further adding to the country's concerns. However, with economic growth remaining a priority to ensure that job creation remains sufficiently high, we still see little room for any significant change in Beijing's exchange rate policy, and as such expect external asymmetries to continue building over the near term.

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