The finance secretary of the Philippines has a message for Asian policymakers tempted to follow China's lead by devaluing their currencies: Don't do it. "We must be mindful of the trade-offs involved in using the exchange rate as a trade tool to boost competitiveness," Cesar Purisima said Sunday.
Chinese exchange-rate officials probably have a thing or two to say about trade-offs. Since its surprise devaluation on Aug. 11, Beijing has been struggling to keep the yuan from outright free fall. Yesterday, Shanghai stocks tumbled a further 8.5 percent. China perfectly encapsulates Purisima's point: The short term benefits of a weaker currency pale in comparison to the costs.
If Asian policy makers are feeling any lingering doubt, here are four further reasons they should resist the urge to devalue.