China for demand...

IMF is backing China for devaluing the yuan when it aspires to be a SDR currency. A currency the IMF and others will use to forward loans for countries in need. IMF is saying that devaluing yuan is a step in that direction. But, a reserve currency status is likely to increase yuan’s demand; therefore it should appreciate, and not depreciate. Dollar’s reserve currency status makes it strong. Actually, China wants to stop sagging growth rate by increasing export-competitiveness, but at the cost of domestic-demand by cutting real-wages with inflation. Does it sound good or any way better (?) when you are favouring foreign-demand against the domestic demand. This does not sound (too) good to go about it. In a way the Chinese are taking money from domestic-consumers and giving it to foreigners. The downward-nominal-rigidity makes wages hard to cut, but it is always easier to cut on real wages by increasing inflation in order to make the economy competitive. The economy is experiencing deflation which means low relative demand or high supply. To overcome this situation Chinese might try to increase demand by increasing real-wages by lowering the price-level which is also likely to increase export-competitiveness. Using lose money-supply in a low unemployment country, and higher wages and inflation will make you globally uncompetitive. Economists know that a reserve-currency status and strong yuan will depreciate dollar and help US’ exports...