Taiwan’s newly elected president Tsai Ing-Wen plans to set up a quasi-sovereign wealth fund to kick-start innovation-driven industrial development. She wishes to bring Taiwan into the US-led Trans-Pacific Partnership and enhance economic cooperation with several countries beyond China.
Although economic deceleration is expected and is not necessarily a terrible outcome for China, concerns over the transition are warranted. Indeed, the economy is facing numerous constraints, domestically and externally.
The importance of innovation which the Chinese government puts on economic growth merits a review of the issue and the lesson of productivity paradox in which the US experienced will hopefully shed some light.
There are valuable lessons that policy makers can draw from the successful defense of the Singapore dollar against depreciation pressure in 1985 and interestingly, the case bear many resemblances to the RMB situation today.