How low can prices go?

摘要

Four years ago, China figured prominently in the disaster scenarios of some international economists. At the time, South Korea, Thailand, Indonesia, and Russia had all suffered severe currency crashes-and contagion was raging through South America. As a result, China's once-booming export machine sputtered to a near-halt, and its manufacturers were pleading with the government to do something. What would happen if China were to sharply devalue its currency to boost its competitiveness? The result, economists wor- ried, would be another devastating round of devaluations around the world that would exacerbate the global financial crisis. Beijing thought long and hard. In the end, it decided to keep the yuan fixed at 8.28 to the U.S. dollar, to the great relief of the outside world.