Jeffrey D. Sachs says the economic malaise that affected Japan in the 1990s has come knocking on China's door. In the 1980s, Japan's growth provoked both fear and admiration in the West, especially in the US. But the roaring boom unravelled after a property bubble in the late 1980s. Japan suffered worse than any of the big industrial nations and never fully recovered from the stagnation of the 1990s. China thrived thanks to "booming exports in the mid-2000s." The US delivered the "same message" once sent to Japan and threatened to retaliate, "unless the Chinese authorities took steps to restrict exports." This led to an appreciation of the renminbi, and a shift to “consumption-led growth.” Sachs says "the US insistence on renminbi appreciation intensified after the onset of the 2008 financial crisis."

Sachs sees an overvalued yen as the reason for Japan's "lost decade" and urges the Chinese to depreciate their renminbi. Well, he ought to know that the US felt threatened by Japan's "soaring manufacturing exports" and pushed Tokyo to appreciate its yen, bringing Japan's growth "to a screeching halt. In 2009 Tim Geithner accused China of “manipulating” its renminbi. The US felt that China kept the value of its currency low on purpose to boost exports - hurting American business. Another reason for discontent stems from China’s growing dollar reserves, which drive up the value of the dollar and hold down the value of the renminbi. As of March 2015, China’s foreign exchange reserves were $3.73 trillion, or 40 percent of its GDP. For this reason "The Economist" has advised China not to depreciate its renminbi, to avoid being accused of "currency manipulation" by the US.

In 2005 Beijing ended its fixed rate and opted for a managed float. Since then the renminbi had appreciated about 30-40 percent, raising the price of Chinese exports to the US by one-third. There was a "modest 3% nominal depreciation against the soaring US dollar" in August. Sachs believes China needs to "further" depreciate its currency "to bolster its flagging economic growth and avoid a long-term 'Japan trap'.”

Last month President Xi Jinping commented that, “Given the current economic and financial conditions at home and abroad, there is no basis for sustained depreciation of the RMB.” Moreover, "the People’s Bank of China has been defending the currency’s valuation through foreign-exchange sales. " Experts say their main objective was to better align their foreign exchange regime to IMF guidance. China has long demanded to be included in the IMF pool of global reserve currencies, a key requirement for which is a renminbi more closely aligned with market rates.

Japan's "lost decade" had been marked by deflation, an ageing population and ballooning public debt. Minus the deflation China is facing similar problems. Due to its large population, China remains poorer than Japan in terms of GDP per capita. Japanese domestic politics and its public debt pose an additional risk to recovery. So do China's, and wage growth will slow. Xi had urged the Chinese public to accept the “new normal” of economic growth. Sachs ought to know that growth is not the key to a nation's sustainability and its people's happiness!