The IMF doesn’t share U.S. view that China’s massive trade surpluses are hurting the world, and that tension is likely to grow
4 min
Eighty years ago world leaders meeting in Bretton Woods, N.H., created the International Monetary Fund to prevent the sorts of economic imbalances that had brought on the Great Depression.
Today, imbalances once again threaten global harmony. China’s massive trade surplus is fuelling a backlash. The U.S. attributes those surpluses to China holding down consumption while subsidising manufacturing and exports, inflicting collateral damage on its trading partners. And it would like the IMF to say so.
The IMF, though, has steered a more neutral path. It has prodded Beijing to change its economic model while playing down any harm from that model for the world.
Decades ago, U.S. leaders thought bringing China into the postwar economic institutions such as the IMF and World Trade Organization would make Beijing more market-oriented and the world more stable. They now think the opposite. China has doubled down on an authoritarian, state-driven economic model that many in the West see as incompatible with their own.
The IMF, the world’s most influential international economic institution, may find itself torn between irreconcilable visions of the global economy, especially if former President Donald Trump is re-elected next month.
Trump has prioritised reducing the trade deficit, especially with China, through tariffs, an approach the IMF has criticised. Many of his advisers are deeply suspicious of both Beijing and international institutions. Project 2025, an agenda for a second Trump term that includes many Trump advisers as authors, has suggested the U.S. should leave the IMF, though there is no sign Trump agrees.
The U.S. has been upset about the growth in China’s trade surplus since it joined the World Trade Organization in 2001, wiping out U.S. factory jobs in what became known as the China shock .
China’s surpluses have since shrunk as a share of its gross domestic product. But because China’s economy is now so large, that surplus has grown as share of world GDP, to 0.7%. Other countries are alarmed at a growing flood of cheap manufacturing imports, dubbed “China Shock 2.0 .”
Jake Sullivan , President Biden’s national security adviser, said at the Brookings Institution Wednesday that China “is producing far more than domestic demand, dumping excess onto global markets at artificially low prices, driving manufacturers around the world out of business, and creating a chokehold on supply chains.”
Treasury Undersecretary Jay Shambaugh told me at a panel organised by the Atlantic Council two weeks ago that China is “already 30% of global manufacturing. You can’t grow at a massive rate when you start from 30% of the world without displacing not just us, but lots of countries.”
Pointing out such tensions is part of the IMF’s job, Shambaugh said at the event. While the IMF has said China’s industrial policies may be hurting its trading partners, “I would like to see them pay more attention…to the aggregate external imbalance.”
The IMF’s architects believed a breakdown in economic cooperation contributed to the Depression. Countries such as the U.S. that ran large trade surpluses felt no pressure to help those with deficits, like Britain. Depressed countries sought to limit imports and boost exports by devaluing their currencies or imposing tariffs, in effect seeking to export their unemployment.
To end such “beggar-thy-neighbour” policies, British economist John Maynard Keynes proposed that trade be conducted through a global bank and currency that would prevent big deficits and surpluses. Instead, at Bretton Woods, delegates agreed to peg their currencies to the dollar with the IMF overseeing periodic revaluations.
By the 1970s, inflation and growing trade deficits caused fixed exchange rates to collapse. Cross-border capital flows soared, enabling poor countries to borrow from western banks and investors. When they defaulted, the IMF had a new mission: helping them restructure their debts, usually on the condition of strict budget austerity. IMF, a popular joke ran, stood for “It’s Mostly Fiscal.”
Even today, while the IMF does still monitor trade deficits and surpluses, it rarely attributes those to cross-border influences, focusing instead on fiscal and other domestic factors.
In a blog post last month, IMF staff investigated the U.S. deficit and Chinese surplus and found little connection.
The U.S. deficit reflected strong government and household spending, while China’s surplus resulted from slumping property markets and domestic confidence. They “are mostly homegrown,” they wrote. In an implicit rebuke to the U.S., they wrote, “Worries that China’s external surpluses result from industrial policies reflect an incomplete view.”
This benign view of Chinese surpluses has drawn criticism. Brad Setser , a former U.S. Treasury official now at the Council on Foreign Relations, said the IMF has relied on data that understates the surplus.
Setser also raps the IMF’s advice to Beijing to let interest rates and the exchange rate fall while tightening fiscal policy—that is, raising taxes or cutting spending. That, he said, will weaken imports, boost exports and thus widen the trade surplus.
“Their analysis is all about how bad the fiscal situation is, with no real analysis of the balance of payments position,” Setser said.
Pierre-Olivier Gourinchas , the IMF’s chief economist, disagreed. He noted the IMF has consistently urged China to boost household consumption such as by strengthening the social safety net and shifting more of the tax burden from the high-consuming poor to the high-saving rich. He also noted that the IMF has argued for fiscal stimulus now and consolidation later.
Does the IMF’s opinion make a difference? Most countries—the big ones especially—will never need to borrow from the IMF and can thus ignore its advice. The IMF has long urged the U.S. to rein in its budget deficit, noting this contributes to its trade deficit, and the U.S. has just as long ignored it.
And yet when the IMF speaks, it does so with an authority and credibility that no private analyst or individual country commands.
China’s approach to boosting exports is “killing jobs elsewhere, and that’s something the IMF should call out,” said Martin Mühleisen , a former senior IMF official now at The Atlantic Council. “China doesn’t want bad publicity from the IMF, in part because the criticism would resonate in many countries.”
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Rare banknotes can yield big bucks, if you know what to look for
4 minEven as the world increasingly moves toward digitised commerce, where transactions are conducted with the tap of a credit card and billions of dollars are moved electronically between banks, there is one group of people for whom hard cash is still king: collectors.
As an alternative asset class, collectible banknotes offer significant potential value to investors, and the market for these paper artefacts is thriving. Aris Maragoudakis , director of world currency auctions at Stack’s Bowers Galleries in Costa Mesa, Calif., estimates the hobby sees annual trade of well over $500 million globally.
In fiscal year 2016, the World Paper Money department at Stack’s recorded about $4 million in sales. By fiscal year 2024, this figure had risen to $14.5 million. The company reported an 18% increase in sales for world paper money (which doesn’t include U.S. paper-money numbers) in fiscal year 2023, followed by 25% growth in fiscal year 2024.
Elsewhere, the Noonans Mayfair London realised £5 million, or about $6.5 million, in world banknote sales in 2023, up from £2.5 million the previous year, a representative said.
The rise of digital technology has helped broaden the base of collectors. Online auctions, forums and databases have made it easier for collectors to connect, trade and research. Greater access to information about collectible money, as well as to collectible banknotes themselves, have transformed the hobby from a game of chance to a strategic pursuit where enthusiasts can actively search for and acquire valuable pieces.
“The advent of social media such as Instagram and WhatsApp have brought in a spate of new collectors, especially youngsters,” says Rezwan Razack , a specialist in vintage banknotes and chairman of the Indian chapter of the International Bank Notes Society, or IBNS.
While social media has made more people aware of older paper currencies and their histories, the declining use of physical banknotes has made them even more alluring and fascinating to collectors.
Banknotes routinely become obsolete due to political shifts, security upgrades, monetary policies and technological advancements. The question is: Which ones are worthy possessions?
A plethora of factors underpin the desirability of collectible paper money. The major ones are:
• Condition: The condition of a piece can have a significant impact on its value. “There are bills that sell for $1,000 with a fold or two, but finding one free of any folds, stains, or tears could be worth several times that,” says Maragoudakis.
The condition of a bill is evaluated based on a 30-point scale ranging from poor to uncirculated crisp. Within each condition, a bill is given a number grade; a higher number—on a scale typically from 1 to 70—means the banknote is in better shape.
For example, a 10,000-yuan note issued in 1951 by the People’s Bank of China, graded Very Fine 20, sold for $150,000 at a Stack’s Bowers auction. Three years later at another Stack’s Bowers auction, a similar note in better condition, graded Almost Uncirculated 50, fetched $358,500.
• Serial number : Banknotes with striking serial numbers are often worth more to collectors than those without. On eBay, a rare polymer £20 bill with the serial number AA44 444444 received 16 bids and sold for more than £317.
A set of four exceptionally rare Chinese 1953 10 yuan notes from the People’s Bank of China recently sold for $432,000 because in addition to their quality, they were consecutive in serial number.
• Scarcity : The appeal and worth of banknotes, as with other collectibles, are often tied to their rarity.
For instance, high-value banknotes were often printed in limited quantities due to their significant purchasing power, says Hakim Hamdani , director at large and a collector at the Netherlands branch of the IBNS. When these high-denomination notes are discontinued, many people cash them in rather than keeping them as collectibles.
Take the 1921 10,000-shilling note from British East Africa (now Kenya and Tanzania), of which few were printed and issued. At that time, it was equivalent to about $2,000, a substantial sum in 1920s colonial Africa. When they were demonetised, most were redeemed, making the few remaining in private hands highly desirable.
Dennis Hengeveld , president of World Banknote Auctions in Sacramento, Calif., says that depending on the condition, some of these notes have fetched between $35,000 and just over $100,000 at auctions.
A rare $500 Canadian bill from 1911 brought C$528,750 (about $386,400) at a recent auction, the largest sum ever paid for a Canadian banknote. The specimen features the image of Queen Mary and is one of only four of the bills known to exist.
• Error notes : Governments often withdraw banknotes from circulation to deter counterfeiting, but also due to printing anomalies such as incorrect signatures, numerical discrepancies, misprints and typographical errors. Such deviations can elevate their value among enthusiasts.
In the U.S., double denominations—such as a front displaying a $10 bill and the reverse displaying a $20 bill—are the most prized error notes. The value of some of these pieces could top $85,000, according to Heritage Auctions.
Despite the potential for a lucrative return, experts say the primary motivation for building a collection should be enjoyment and an appreciation of the history that banknotes provide. It would be best to build a collection with the idea of having fun, says Hengeveld of World Banknote Auctions, which was recently acquired by Stack’s Bowers.
Of course, it’s essential to do your due diligence to avoid fraud. Always buy notes from established dealers and confirm their authenticity with reputable grading services. Independent grading companies such as Paper Money Guaranty and Professional Coin Grading Service provide authentication and grading to ensure notes are genuine and their condition accurately assessed.
Auction houses and local dealers offer currency notes in different price ranges. Online retailers (eBay, Amazon.com, Collectibles & Currency), dealers and galleries (Certified Coin Exchange, George H. LaBarre), and numismatic shows (the MIF Paper Money Fair and World’s Fair of Money) are other useful sources.
As well, there is no shortage of stories where people discovered highly valuable collectible banknotes in attics, books, dressers and photo frames of deceased family members. In Ontario, a rare Canadian $500 bill from 1911 was discovered among the personal belongings of a deceased individual. The nearly discarded banknote, one of only three in existence, brought $322,000 at auction.
Those looking to dip their toes into collectible money may find valuable insights in trade magazines including Bank Note Reporter and the Greensheet, or books such as the U.S. Error Note Encyclopedia and Standard Guide to Small-Size U.S. Paper Money.
Additionally, Paper Money Guaranty, the Smithsonian Learning Lab and other websites can offer a wealth of information on various aspects of grading, collecting and how to properly care for banknotes.
