"Trade friction" should be your last consideration, China

The US ex-undersecretary for international trade of its Commerce Department Aldonas said (what a long ex-title!), "China Needs to Free Capital to Cut Trade Friction".

He may be right, provided that to "cut trade friction" is China's top priority right now, over a healthy GDP growth and ensuring employment stability. But that is not the case.

I was aghast at Mahatir's imposing capital control in 1998. But that, together with "Battle of Stalingrad" in HK, were the turning points of the Asian financial crisis around 1997-1998. I am a firm believer in free market. However, I am also a pragmatist.

I am still not sure if HK did the right thing in the battle with speculator in 1998. Even 10's of billions of USD in spoil may not justify the referee's taking side in a soccer match (as the HK media put it). How do you host games in future? And you don't always win. To convince a pragmatist you need to demonstrate "repeatability".

On the other hand, Malaysia's lesson is what we should study and learn from. Until the Malaysian lesson is fully analyzed by academic and fully understood, do not listen to Mr. Aldonas, China. Stick to your proven strategy of gradualism.

Yes, floating RMB is the eventual objective. But there is no need to change your schedule or sequence of moves just because there is so called "trade friction". Listen to the academics who are neutral and those who put truth and their own credential above personal or national interests. Do not listen to politicians.

As for "trade friction", leave that to WTO which you have joined now.

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