Global Economy

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[url="http://www.bloomberg.com/news/2010-06-20/china-turns-tables-on-aaa-debt-time-bomb-nations-william-pesek.html"]China Turns Tables on AAA Time-Bomb Nations: Commentary by William Pesek[/url]

Your move, folks.



That’s the message from China’s surprise move to allow a more flexible yuan. China, in signaling it’s okay with a rising currency, voiced a strong vote of confidence in its economic outlook. It also shifted the onus to the developed world in a crafty and unambiguous way.



Timothy Geithner and his team at the U.S. Treasury should keep on ice the champagne they’re tempted to open. Now it’s time to start getting their own imbalances in order. The debt explosion of the past two years isn’t just unsustainable, it’s a growing threat to global stability.



Chess games are won by those who can think and plan the farthest ahead. China, at least at the moment, appears to have a better sense of how the board is laid out. The question now is what Geithner and his partners in history’s greatest debt orgy do.



It’s wrong to conclude China was browbeaten into acting. Yes, the step means Chinese officials can breathe easier arriving in Toronto for next weekend’s Group of 20 meeting. Yet a rising yuan will make it easier to tame asset bubbles and reduce inflation risks. It also increases the purchasing power for the nation’s 1.3 billion people. Efforts to kick China’s addiction to exports are now underway.

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