Yu Yongding — China’s Trilemma

The Nobel laureate economist Robert Mundell showed that an economy can maintain two – but only two – of three key features: monetary-policy independence, a fixed exchange rate, and free cross-border capital flows. But China is currently juggling all three – an act that is becoming increasingly difficult to sustain.

Project Syndicate
China’s Trilemma
Yu Yongding | former president of the China Society of World Economics and director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, served on the Monetary Policy Committee of the People’s Bank of China from 2004 to 2006. He has also served as a member of the Advisory Committee of National Planning of the Commission of National Development and Reform of the PRC.