Don’t misread the trade implications of the euro crisis for China

How much does the Greek crisis matter for China? There are, as far as I see, broadly two schools of thought. One school says that the Greek crisis is largely a problem internal to Europe, and its impact on Europe and the rest of the world is too small to matter much. In support they point to limited bilateral trade relationships between China and the most affected European countries.

The second school focuses on the impact of the Greek crisis on the real exchange value of the RMB and the threat of diminished demand in Europe’s deficits countries. Thanks to the collapse of the euro, they point out, the RMB has already revalued in real terms and this, combined with expected weakness in the European market for imports, means that China should be more cautious than ever in adjusting the value of the currency.

via China Financial Markets » Don’t misread the trade implications of the euro crisis for China.

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