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Yuan appreciation nightmarish for US

By Zhou Jimo (Global Times)

09:15, October 12, 2011

Illustration: Liu Rui

Some US politicians keep pressuring China for the appreciation of the yuan, which makes some Chinese scholars think that it is unavoidable for the exchange rate war between China and US. They even hold that it is the same trick played by the US in 1985, when the US forced Japan into the Plaza Accord, under which the Japanese yen was pushed up to reduce the growing US trade deficit with Japan. After that Japan lost its influence on international monetary systems.

I do not completely agree with them. I think Americans actually are more fearful of yuan appreciation.

At present, many US economists and market analysts point out that the exchange rate has limited influence on Chinese exports and US employment. The US House of Representatives and the President even have different opinions. Why is the US so confused on this issue?

On the one hand, yuan appreciation means the decline of the US dollar’s international role as a global currency. By printing dollars, US could easily handle various difficulties caused by the financial crisis. So now the US both wants the yuan to appreciate and also fears it. Quite a few Americans think that only the appreciation of yuan can restrain Chinese exports and perk up the US manufacturing industry.

But some Americans realize that it also means the depreciation of the dollar and the decline of the dollar’s status. With the relative slump of European and US economy, China has become the chief engine of the global economy and the yuan has gradually turned into a pillar of the international monetary system. Its status and influence are far above the yen of that time. In other words, yuan appreciation actually means the US dollar depreciation against the yuan instead of yuan appreciation against the US dollar.

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Leave your comment4 comments

  1. Name

Eastern Westerner at 2011-10-13124.171.121.*
I want to move to China, it is so much safer and more equal.
Fernando Bensuaski at 2011-10-12183.13.236.*
The author has not done his/her homework. The phrase, "US refuses to recognize the yuan’s status as universal currency" is ridiculous. The Yuan is not convertible. How can it possibly be universal?
Mishra at 2011-10-122.50.225.*
I think the way out for China is more bilateral settlements in yuan if it has to become an international currency.This requires more political strategy in combination with economic policies.US & its dollar manipulation will however continue and with no alternatives people will play its bet on $ for the moment.China has to try big alternate markets,make yuan settlements and not buy any more US or Europe debt.Mishra,India
PD User at 2011-10-12203.127.232.*
I,fully support the view of the writer.China must do what China thinks is right.US has their own agenda. The US Democrats/Republicans are fighting amongst themselves to such an extend the country is becoming rejection of Obama"s job bill.China must make full use of this period of economic turmoil of US/EU to build up more strongly on our own military cabilities, R&D cyperspace, etc to catch up to be on par in the next 5-10 yrs with the West.Otherwise China will go done like what Japan is becoming,a 2nd class power soon.Best Wishes for a srong China."Concerned citizen of the world"

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