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An Economic Realist – Eswar Prasad Offers His CHINA DAILY USA Friday-Sunday, February 10-12, 2017 ACROSS AMERICA 15 People AN ECONOMIC REALIST Eswar Prasad of ers his insights into China’s reform and development past, present and future By CHEN WEIHUA in Washington BIO [email protected] Eswar Prasad does not agree ESWAR PRASAD with US President Donald Trump’s charge that China is Born: 1965 manipulating its currency, but he believes it is tempting for Tolani Senior Professor Trump to say that. of Trade Policy, Cornell From the start of his presi- University dential campaign in June 2015, Trump has accused countries Senior Fellow, Brookings like China, Japan and Germany Institution of manipulating their curren- cies. His claim against China Work: was dismissed by many econo- • Senior Fellow and New mists who argued that China Century Chair, Brookings actually has been propping up Institution, 2008-present its currency, the renminbi, also • Tolani Senior Professor known as yuan, from devalu- of Trade Policy, Cornell ation, thereby helping the US University, 2007-present economic competitiveness. • Division Chief, Financial Studies Division, Research Department, IMF, 2005- 2006 • Division Chief, China Division, Asia and Pacifi c ... The People’s Department, IMF, 2002- 2004 Bank of China has • Economist (1990-2000), Senior Economist (1998- been intervening in 2000), • Assistant to the Director currency markets (2000- 2002), IMF ... to prevent the Education: • University of Madras (B.A, renminbi’s value Economics, Mathematics, from falling too and Statistics, 1985) • Brown University (M.A, sharply against the Economics, 1986) Eswar Prasad’s latest book examines the • University of Chicago dollar.” progress of China’s currency. (Ph.D., Economics, 1992) Eswar Prasad, Cornell Books: University professor and Economist Eswar Prasad disagrees with US President Donald Trump’s assertion that China is intentionally keeping its currency lower so it can sell more goods on the world’s • Gaining Currency: The Brookings Institution senior markets. Prasad says that China is actually intervening to prevent the renminbi, or yuan, from dropping too much against the dollar. PHOTOS PROVIDED TO CHINA DAILY Rise of the Renminbi, fellow Oxford University Press, legal framework for a mar- IMF had also grown. Prasad October 2016 ket-oriented system and more saw reform-minded Chinese • The Dollar Trap: How the corporate and government officials seeing the IMF as U.S. Dollar Tightened Its In an article in late December, transparency with data. having the capacity to pro- Grip on Global Finance, Prasad, an economist and for- vide good technical input into Princeton University mer head of the China Division China hand reforms. Press, February 2014 at the International Monetary Now widely sought for “I, too, quickly realized that • Emerging Markets: Fund (IMF), blasted Trump’s his expertise on the Chinese if we help reform, ultimately Resilience and Growth statement that China was “rap- economy, Prasad admits that what IMF could do could con- Amid Global Turmoil (with ing” the US economy through an when he became the China tribute to China’s economic M. Ayhan Kose) Brookings unfair trade policy and currency division chief at IMF in 2002, development as well,” he Institution Press, manipulation as “dangerous, as he did not have deep knowl- recalled. December 2010. they are unmoored from reality”. edge about China. His job at the time was two- “Make no mistake: Trump’s Prasad had worked at the fold: develop the IMF’s policy accusation of Chinese currency IMF for years while pursu- position on China and think manipulation is not supported ing his PhD in economics at about how to create a construc- by the facts. On the contrary, for the University of Chicago. He tive engagement. Chinese students the last 2 1/2 years, the People’s said Yusuke Horiguchi, then Shortly after Prasad took the Dividing his time between Bank of China (PBOC) has been head of IMF’s Asia and Pacifi c job, the IMF Asia and Pacifi c Cornell in upstate New York intervening in currency mar- Eswar Prasad, a senior fellow at the Brookings Institution, talks about his new book Gaining Department and a Japanese Department had a new chief, and Brookings in Washington, kets for the opposite purpose: Currency: The Rise of the Renminbi, at the Brookings-Tsinghua Center for Public Policy in Beijing on national, “took a chance on David Burton, a UK national. Prasad has many students, to prevent the renminbi’s value Nov 3, 2016. me and made me head of the Prasad said both he and Bur- both PhD candidates and from falling too sharply against IMF China Division”. ton thought the best way to undergraduates, from China. the dollar,” Prasad, now a profes- “So, it was literally learning engage China was to respond Some of his PhD students sor at Cornell University and a Trump, as a pragmatic busi- become whether there will be problems, he said. by doing,” he said. to the Chinese government’s have graduated to join the senior fellow at the Brookings nessman, understands well an explosive crisis that brings China, Prasad believes, has Prasad felt lucky at that demand for technical advice. World Bank, teach at the Uni- Institution, wrote in the article that the US will also suffer the Chinese economy to its to come face to face at some time, as the IMF had a tre- “And they were very receptive versity of California and work on Project Syndicate. heavily in a trade war, Prasad knees. point with the problems, mendous amount of institu- to that,” he said of the of cials. at Wall Street fi rms. He said last week that the believes that the risk is that “I think it’s unlikely that it mostly in the banking system tional knowledge about China. He would not credit IMF for He credited his Chinese reason behind Trump’s possible political factors may override will happen,” he said. over nonperforming loans. “I had a team which had China’s success in its economic undergraduate research assis- naming of China as a currency economic factors. According to traditional The question to be asked is: very good people who knew a reform and development, say- tants as “instrumental” for the manipulator was his campaign He warned that nobody indicators comparing the How expensive it is going to lot about China, plus we have ing the Chinese government chapter on China’s monetary promise to bring back jobs to wants a trade war because amount of corporate debt to be to fi x the problem? an of ce in Beijing,” he said, has been good at absorbing history in his book Gaining the US. both the US and China will fi nd total debt, Prasad believes He emphasized that get- adding that the IMF China views from the IMF, the World Currency. “That is very difficult to do it mutually harmful. “I hope that China seems that it could ting the finance part right Division chief does not live in Bank, the OECD and other “It was a couple of my Chi- very quickly. But I think it’s very there will be more sensible poli- have crashed by now. is crucial for China, because China, but works at the Wash- independent people like him- nese undergraduate students important for his political base cies taken,” he said. Right now, But he wanted to remind Chinese save so much domes- ington headquarters. self right now. who actually dug up a lot of that he does something,” Prasad he sees uncertainty. people of some important fac- tically. “And locating that It was in that position that The Chinese government these really fascinating archi- told China Daily. “I hope this will not be the tors. Key among them are the domestic savings to the most Prasad made his first trip would then make its own deci- val materials that allowed me case. Many economists hope small external debt relative productive sector is going to to China, around the end of sion. “Sometimes you agree to write that chapter,” he said. Tensions in trade this will not be the case. This is to the size of the economy be crucial for China’s econom- 2002, a trip he described as with them, sometimes not,” he During his book tour late A study by the Center not good for the US economy, and relative to the country’s ic development and more bal- deeply impressive. said. last year, including the one on for Business and Economic but it may still happen,” Prasad foreign currency reserves as anced growth,” he said. Having read about China’s Over time, Prasad realized Sept 23 at the Brookings with Research at Ball State Univer- said of a possible economic well as the high savings rate In his view, China’s economic reform and devel- the difficult economic and former US Federal Reserve sity showed that 85 percent confl ict between the world two among the population. reforms have become imbal- opment in the 1980s and political constraints felt by chairman Ben Bernanke sit- of the 5.6 million job losses largest economies. The overall government anced. In the past year and 1990s, Prasad, who came Chinese officials in pushing ting next to him, Prasad in the US between 2000 and balance sheet does not look a half, he saw that China from India to the US in the reforms. At the IMF, Prasad started his presentation by 2010 were due to technologi- Reforms that bad to him. Much of the made progress in financial 1980s to pursue graduate had argued for more dramatic intoxicating the audience with cal change, mainly innovation, Prasad, whose latest book non-performing loans are market reforms such as lib- studies, was still expecting reforms in China.
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