China, US should transcend economic fears

In his inaugural address of 1933, Franklin D. Roosevelt famously said that, "the only thing we have to fear is fear itself". Those words provide guidance to the upcoming summit between Chinese President Xi Jinping and his US counterpart Barack Obama, which takes place under deepening economic challenges.

In the US, the concern is that China's exchange rate adjustment could trigger a global currency war. In China, the concern is that the US Federal Reserve's impending rate hikes could trigger detrimental capital outflows.

On Aug 11, the People's Bank of China made a change to the central parity of the renminbi against the US dollar to better reflect market conditions. The net effect was a depreciation of 1.9 percent relative to the US dollar. After a decade, the renminbi, unlike the BRIC currencies, had appreciated 30 percent against the US dollar. A re-adjustment was required; depreciation was its side effect.