Why Krugman Is Wrong About The Yuan

During separate trips to China this week, President Barack Obama and Dominique Strauss-Kahn, the managing director of the International Monetary Fund, both pushed for a stronger renminbi, the Chinese currency, whose principal unit is the yuan. Although the yuan has appreciated 20% against the dollar over the last several years, Obama and Strauss-Kahn both agree with Paul Krugman, the Nobel Prize-winning New York Times columnist, who wrote on Nov. 15 that China severely undervalues its currency. Krugman believes that to reduce America's trade deficit and spur worldwide recovery, China needs to strengthen the yuan.