Posted on 06/10/2005 5:36:17 AM PDT by Brilliant
...the U.S. has turned up the volume ...to get China to stop fixing the exchange rate ... But many think that China will not want to be seen as buckling under U.S. pressure: Public demands...will only make the Chinese take longer... U.S. officials know this. So why are they pushing? ...
Over time, the move to a flexible yuan will be good for the U.S...
At first, however, the U.S. will feel a sting from a stronger yuan. If China's currency is undervalued by 27%, ...U.S. consumers have been getting a 27% discount on everything made in China, while the Chinese have been paying 27% too much for Treasury bonds. One might wonder why the U.S. is complaining... Revaluation would end the Chinese fire sale. Americans will pay more for everything ... Other global investors will buy up U.S. bonds the Chinese no longer want ...and the public will have to pay higher interest rates... And don't expect U.S. job gains... China's undervalued currency has cost jobs, but they were lost in Malaysia, Honduras, and the other low-cost countries from which U.S. clothing and toys will be sourced as Chinese exports slow.
So if there is short-term pain in this for the U.S., why pressure China to revalue? U.S. policy makers surely understand the downsides... And they certainly must realize that their very public campaign only makes it more difficult for the Chinese to take action. Could it be that this is the point? A cynic might hope that the push for a Chinese exchange-rate change is not a response to misguided political pressures, but is instead a devious attempt to prolong the enormous benefits the U.S. derives at China's expense from the fixed dollar-yuan exchange rate...
(Excerpt) Read more at online.wsj.com ...
I've heard that argument before. Suppose they raised it so high that they were just giving all their stuff to us for free... I wouldn't object, personally.
To me, it is obvious that the Yuan must come up and the Chinese be forced farther up the value chain, thereby buying more American goods and services. The sooner it happens the better. If there is any political calculation in timing it is one of taclking this now rather than later. Bush is to be kauded for addressing the issue, and the same ankle bitters that where bemoaning the Yuan pag a year ago are now saying that it really does not matter. Of course, if Bush were to reverse himself on this we would see acres of print condeming this as short sighted.
The Chinese have been holding this out as a carrot in various negotiations, not the least of which are those over N. Korea, and I should say that it is becoming increasingly obvious that it was all just a con.
Forcing China to cat like the economy it is will force them to deal with a great many internal issues, and this will help us all in both the long and the short term
I don't disagree. I just think that we're making a bigger deal out of it than it deserves. Even if they've got it pegged 27% too low, which is what the article suggests is the most it could be, then it's not such a big deal. I'm willing to pay 27% less for my t-shirts and undies. I doubt that it will cost us too many jobs.
Frankly, I'd rather that they make textiles than missiles. The more butter they make, the better.
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