The China Delusion

NEW YORK – China’s management of its exchange-rate peg continues to rattle global financial markets. Ongoing uncertainty about renminbi devaluation is fueling fears that deflationary forces willsweep through emerging markets and deliver a body blow to developed economies, where interest rates are at or near zero (and thus cannot be lowered to defend against imported deflation). Fiscal gridlock in both Europe and the United States is heightening the angst.