China and the eurozone are alike in terms of unbalanced regional growth and having a common currency. Inland China, with growth much slower than that of coastal China, calls for a weak currency. However, RMB, the common currency for all of China, cannot depreciate to match inland China’s weak...

We characterize the dilemma of one currency area: the common currency’s value is overvalued for regions with poor fundamentals, which hampers export. With labour market rigidity, they cannot reduce labour costs to restore its growth, leading to further reduction of exports. Using Chinese...