WIN/WIN VS LOSE/LOSE:

Reports of the death of American power have often been greatly exaggerated. In the 1950s the Soviet Union was thought to have surpassed the United States; today, the Soviet Union no longer exists. In the 1980s, Japan was widely regarded as on the verge of overtaking the US; today, after more than two decades of Japanese stagnation, no one would take this scenario seriously. And in the 1990s, monetary union was considered likely to propel Europe to greater global prominence; today, the European economy is frequently in the world's headlines, but not in a good way.

Now it is China's turn. [...]

The bigger issue is China's exchange-rate policy. For a long time, China prevented the renminbi from becoming overvalued - and this was good policy, as Subramanian's research confirms. But in the early 2000s, China went too far. For reasons that are still debated, the renminbi became massively undervalued; exports were much higher than imports, and the current-account surplus reached more than 10% of GDP. Instead of letting the renminbi appreciate and gradually reducing their reliance on export markets, the Chinese authorities preferred to accumulate foreign reserves (US Treasury debt).

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