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September 3, 2003
China
Currency Talks with China
Posted by Carole Matthews at 11:12 AM
United States Treasury Secretary John Snow arrived in Beijing yesterday in an attempt to encourage China to revalue the yuan. The Chinese haven't budged on the yuan's value since 1995, when it was pegged at 8.3 to the dollar, and, as noted in the article, "Democrats and Republicans alike claim that with its refusal to let the yuan rise, China is riding an export boom that is sucking jobs from the US and distorting global currency markets."
But if China is ready to become more competitive in its currency valuation, what does that mean to the American consumer? Most likely, it would raise the prices of many Chinese-made goods, and as Fresh Inc. user JHB notes in a recent weblog comment, "How many of us would own a $1,000 DVD player?, or a $60 toaster?"
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Unlike Japan in the 80s, China has also imported more goods and services from the US. I get the impression that the Bush administration is doing this to show the unions and voters that they are "fighting on behalf of US workers to save American jobs", not because they really expect China to let the RMB float against the dollar. Right now, the president wants to get the right message out for the 2004 election. And this is the cheapest way to get media attention.
Besides, China is the second largest buyer of Treasury bonds after Japan, and is financing America's debt. So a lot of that surplus money comes back to the US to finance our deficit spending.
With a current budget deficit of US$480 billion, not counting the costs of the war and occupation of Iraq, does the Bush administration really want to lose the dollars of the number 2 buyer of Treasury bonds? Who would pick up the torch?
Somehow, this all sounds like a Karl Rove strategy for the 2004 presidential election, not like real monetary policy.
I agree right on target with 1st comment. It is all politics nothing else will be done. Why would china change they are making billions and they steal anything they can not make themself repackage it and sell it at half the price because they did not have to invent it or have any Reasearch or development costs. Every company useing them or going overseas will see all intellectual property pirated just like everything else that they pirate.
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