How China managed to keep the Renminbi down

In a recent article in the Financial Times (11 October), Martin Wolf gave a good overview about the Foreign Exchange policy options that the Chinese authorities have. Interestingly, the fact that China is still a dictatorship was not mentioned. A totalitarian regime is able - similar to Stalin's enforced savings in order to industrialise in the late 1920s and 1930s - to suppress local demand and hoard foreign exchange reserves in a truly mercantilist fashion. These reserves may well be put to a good use at a later time - after all they will soon amount to nearly $1000 for every man, woman and child in this populous country. But this is of little help to those workers in the industrialised world that are priced out of the market by this market manipulation. The European shoe workers may well be inefficient but they do face unfair competition fostered by an undemocratic regime and any analysis of trade politics has to take this non-economic argument into consideration.