Arvind Subramanian hails the decision by China's leaders to allow a gradual rise in the renminbi as a victory for the G-20:
But it is the fact of the G-20 that allowed Secretary Geithner to convert the China currency issue from a bilateral US-China matter (on which little progress had been made for many years) to one in which a broader set of countries had a stake. The public pronouncements by Brazil and India earlier this year re-inforced this “multilateralization” of China’s currency undervaluation. This multilateralization had two positive effects. It forced China to take more seriously the international consequences of its currency policy. And it also made the politics of changing policy easier because China is seen not as caving to bilateral pressure but as responding to the wider international community. Regardless of what happens at the G-20 Summit in Toronto over this week-end, the G-20 can already count the change in China’s currency policy as its victory.
The second implication is this: with China having made its contribution to global re-balancing, it is time to demand the same of Germany, which is the other large surplus country in the world economy, and which has just received a steroidal boost of competitiveness with the decline of the euro.