Senators unveil bill to change U.S. approach to China's yuan

Discussion in 'Forex' started by ASusilovic, Jun 13, 2007.

  1. By Maggie McNeil
    Last Update: 1:42 PM ET Jun 13, 2007

    WASHINGTON (MarketWatch) -- The bipartisan leadership of the Senate Finance Committee introduced a bill Wednesday that fundamentally alters how the United States would handle questions of currency manipulation that have been focused for several years on China's yuan. The new bill, while not specifically mentioning China, would remove a requirement that the Treasury Department label the country a currency manipulator before taking action. Congress has been unhappy that the Bush administration has failed to apply the manipulator label to China. The new bill requires Treasury only to identify "misaligned currencies" to Congress twice a year. It sets out a timetable of action that would follow if a country failed to take remedial action. Included in the timetable is the possibility that imports from the offending country would be slapped with duties and a possible case brought before the World Trade Organization.
  2. For the benefit of us all, the US government should take firms steps to induce the chinese to float their currency unconditionally. Why should they have an artificial advantage over the rest of us? Why not let the rates find equilibrium through natural market forces?

    The chinese must think they are smart by manipulating their currency but they are harming the long term health of their own financial system by creating a huge un-sustainable liquidity bubble that will result in a bout of hyper-inflation, which will erode asset value causing a bust then deflation into a Japan-style generational recessionary period all because they refuse to play fair and have become greedy.

    If the chinese are as good as they think they are they should have the courage to play fair game.
  3. As a Chinese I also think Chinese yuan should appreciate as soon as possible, but the reason is opposite. The thing is now the inflation rate, or living costs of U.S people are kept artificially low due to two factors: their costs for physical goods are kept low thanks to the low exchange rate of Chinese yuan so U.S can import Chinese products at very low prices, and the low costs for labor services due to the huge influx of illegal immigrants from Mexico. So this is what's real about Globalization: people in developed countries are enjoying their good lives because of the sweat shops and slaves labors in and from developing countries. Nowadays Chinese government is really serving only business interests, especially international corporations, so they are sacrificing their own people's interests.

    Those U.S congressmenbers are only criticizing China's exchange rate policy because they need to find a scapegoat to blame for the huge trade deficits of U.S and loss of labors. But if Chinese government really appreciate the yuan dramatically the inflation pressure in U.S will be increased tremendously and Fed Reserve will be forced to hike rates aggresively, which will cause stock market crash and economic recession. In any case this issue is not as simple as most people think and it's not so white and black about what's fairness.
  4. Sorry, Pooh. It's not as simple as A+B+C=D like the chain of events you describe.
  5. I don´t think that the overwhelming part of people in developed countries are held as "slaves". To the contrary - especially in your motherland foreign direct incvestment created a lot of well paid jobs !

    =>According to the PRC press, companies from 190 countries and regions have invested in China, including 450 of the world's Fortune 500 companies. By the end of 2005, FIEs in China employed more than 24 million PRC citizens. If you want more informations on this topic :
  6. IMHO China is also subsidizing a massive know-how / technology transfer from US / EU, by actually allowing its workforce to be exploited in the situation you described.

    In a sense, China is sacrificing today for a better tomorrow. On the other hand, US (and to a point EU) are cashing out the future, effectively passing the bill of their profligacy to their children.

    From the pov of US / EU / Japan, one can easily make the point that they're also serving only (multinational) businesses, who engage in the process of labor arbitrage.

    The middle class has shrunk demonstrably in western countries as more tradeable jobs are being outsourced. And this is why you're starting to see all sort of protectionist issues raised.
  7. The chinese government is keeping the yuan exchange rate artificially low specifically to maintain its own power base by building a country after acquiring the means & know how of production from their foreign investors. If the yuan wasn't so cheap, many would not choose chinese labor over other options, and that would be destabilizing to the current regime, u.s.w....

    Don't forget that we have given up trends toward machine automation in favor of handwork. Its cheaper to hire a chinese laborer than run the machine. Really! Mindblowing, if you ask me. Talk about a great leap forward.

    To our chinese friend: if you want to know why you are currently not the lifestyle of a taiwanese, you have only to look to your own history to explain it.