Although Mao Zedong's presence still superficially dominates the main public space here in Beijing--his mausoleum at one end of Tiananmen Square and his portrait guarding the Forbidden City at the other--almost everything else in China's capital city refutes Mao's life, legacy, and ideas. Once ubiquitous, gray and brown Mao jackets have now been utterly replaced by a new national garment--colorful North Face ski jackets. The other place you'll see Mao is on all the money, known as yuan or renminbi, or simply RMB. Hundred-yuan bills, 50s, 20s, 10s, ones--it's all Mao. The irony is that Mao was not, shall we say, a terrific economist. Yet for the last 27 years, China's management of its economy and this massive transformation of the largest country on earth could hardly have been better. This includes, first and foremost, the stellar management of its currency, which endured a successful high-wire act of two price systems in the 80s--one for the old state-run economy and another for the new private economy--and then, in the mid-1990s, the linking of the yuan to the dollar. Another big success for China, the U.S., and the global economy.
In his visit last month, Treasury Secretary Snow lightened up publicly just a bit on his previous calls for China to float and appreciate the yuan by up to 30 or 40 percent, though many said he was still pushing hard behind the scenes. Incoming Fed chairman Ben Bernanke, in hearings yesterday that were otherwise somewhat encouraging, reiterated his view that a flexible, market-set exchange rate (read: possible Chinese deflation and international instability) was in China's best interest. We've been critical of Snow and Bernanke's views on this topic and will be watching and commenting during President Bush's China stay.