Time to Dump the Fear

Governments and business owners should contain alarm over devaluation of the Chinese renminbi and low-cost goods. “Such is the fear of China’s export juggernaut that the news of the yuan’s devaluation brings about a kneejerk reaction, not only in India but all over the world,” writes Nayan Chanda, YaleGlobal’s founding editor and now consulting editor, in his column for Businessworld. “But not all exports are the same, nor do they have similar impacts on the domestic economy.” Some foreign goods offer high quality and allow countries to join the global supply chain. Others prompt domestic industries to innovate to be more competitive. Foreign firms invest overseas, often adding employment and training in specific skills. In India’s case, critics worry about cheap goods flooding the market and forcing small businesses to close. Trade practices should abide by regulations, yet Chanda notes how affordable electronics from China may contribute to more business services and employment for India. Governments should look beyond the monetary value of trade imbalances and encourage innovation, productivity and efficiency. – YaleGlobal