Comments on Henry Ergas “America takes us back to the seventies”, 16/05/2011, http://www.theaustralian.com.au/news/opinion/america-takes-us-back-to-the-seventies/story-e6frg6zo-1226056356121
Henry Ergas stated that "No doubt, China's economy is deeply flawed, not least because of a distorted exchange rate."
How is China's economy flawed or deeply so? In what way or ways? China is a developing and transitional economy. It cannot be compared to most of world's developed economies.
But does it mean that developing or transitional economies are flawed?
It would help the reader if Ergas was more specific or provided some detail.
It might be the fixed exchange rate, although Ergas argued that was the least of the flaws.
If that were the case, Ergas may consider the fact that free exchange rate regime has also its flaws too and some are quite serious too, such as excessive movements and fluctuations in exchange rates, causing seriously dislocations of currencies and resulting in excessive impacts on businesses and economies.
Economists, however, just accept it as the best, because it's market determine.
But are all market determined good? Why is there a need for macroeconomic theories and policies to correct the market, albeit its failures? Doesn't mean market can have its problems too?