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Commentary: Push for China currency bill based on an error

By Xia Wenhui (Xinhua)

10:52, September 17, 2011

BEIJING, Sept. 16 (Xinhua) -- U.S. Senate Democratic leader Harry Reid's recent drive for a bill aimed at forcing up the Chinese currency erroneously links the yuan to his country's depressed job market.

Reid may argue an undervalued yuan has cost many U.S. manufacturing jobs by giving China's factories unfair advantages.

It's easy for U.S. lawmakers to blame the huge U.S. trade deficit on China, which hit 273 billion U.S. dollars in 2010, when they search for reasons why more Americans cannot get jobs and are unhappy with the economic situation.

But Reid cannot deny the fact that the key reason for the current 9.1 percent unemployment rate is the lagging U.S. economy, which has no immediate link with the yuan.

Many analysts have agreed with this point. Phillip Swagel, a scholar with the American Enterprise Institute for Public Policy Research, has said a sharp appreciation of the yuan will only lead to an increase of 30 percent in U.S. commodities prices, adding more interest costs for government, enterprises and citizens.

A stronger yuan would not fundamentally change the structural problems that existed in the U.S. economy, such as unemployment and the trade deficit, said Swagel, who is also a former assistant secretary for economic policy at the U.S. Treasury Department.

Moreover, a mutually beneficial trade and economic relationship between the United States and China conforms to the common interests of the two countries.

As bilateral trade reached 285.65 billion dollars in the past eight months, Reid should agree that a stronger U.S.-China trade relationship in the past three decades has brought vast job opportunities for the two nations.

A sharp appreciation of the yuan will only deal a grave blow to China's foreign trade and hurt its economy. And a volatile Chinese market will not help U.S. President Barack Obama's ambition to dramatically boost U.S. exports to China.

Now with Obama asking the Congress to pass a jobs-creation package to cut tax and raise money, the White House is trying to boost growth and find more chances for trade and manufacturing.

For Beijing, a better economic relationship with the United States means smooth trade and strong support of the economy, especially when the world is on the edge of new economic turmoil.

Chinese Premier Wen Jiabao said Wednesday at the World Economic Forum Summer Davos meeting in northeast China's port city of Dalian that China was willing to boost financial and economic cooperation with the United States and an open U.S. market and robust exports should be better options for both countries.

For the United States, lowering its barrier for investment and loosening its controls on exports to China would be more helpful than forcing the yuan's revaluation.

Reid was no more than playing politics when he pushed the China currency bill in Congress, not the first time in recent years. The move will do no good for either the Chinese or the U.S. economies.


Leave your comment5 comments

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ASEAN at 2011-09-18220.255.2.*
In the US, there are two groups of people. One group is not so smart and the other group in very smart. Unfortunately, the not so smart people are running the government. When something goes wrong, they blamed others. Remember that in the 70s and 80s, they blamed Japan for all their problems? The very smart group of people is outside the government, who had repeatedly said that printing of money (they call it QE1, QE2, QE3, etc) will not solve their country’s problems. This same group had repeatedly said that they need to cut spending. But the government is not listening to this group of people. Obviously, U.S. Senate Democratic leader Harry Reid belongs to the former group.
Sam Teng at 2011-09-18175.139.83.*
How can the US Senate Democratic leader Harry Reid be so naive as to link the yuan to US depressed job market? This is shocking! Definitely this is politically motivated since the US Presidential election is due soon. Reid is definitely bankrupt of ideas and chose to use Chinese currency as a lame excuse to cover up the economic failures of US government. Shame on you.
romanov. at 2011-09-1780.94.16.*
Hight exchange euro to stop american trade.Yuan should be atracttive for cooperation trades today.His exchange to dollar to be objectivy and real.American should more braves to use stable value yuan how own dollar.
Canada at 2011-09-1770.36.49.*
Corporations in the U.S. serve the interests of their shareholders & obscenely rich executives, not the interests of the people in the U.S. U.S. corporations were sitting on 2 trillion in cash by the end of 2010 but didn’t use the money to create jobs in the U.S. Instead the money is used for mergers & acquisitions that usually result in job losses, share buybacks, huge executive bonuses & salary increases, expanding their corporate presence in other countries, the benefits of which flow only to corporate shareholders & executives. Corporations and the rich pay next to no taxes in the U.S. – the tax load has been shifted almost entirely onto the backs of the masses. There is no planned economy. U.S. lawmakers won’t recognize or admit that capitalism is at fault, nor will they properly tax the rich and corporations to reduce their debt & deficit. If there is a sharp increase in the yuan, or manufacturing wages rise substantially in China, there is a point at which non Chinese corporations will move their manufacturing to another country that has lower wages & lower taxes…it won’t do anything to improve the U.S. economy. Offsetting the possibility Western corporations will move their operations to another country, is corporations want access to the lucrative domestic Chinese consumer market so they may maintain a manufacturing presence in China for that reason. In my opinion China needs to develop a State manufacturing sector in China that produces the best designs & best quality goods for the Chinese consumer market…luxury goods at affordable prices. This prepares for the day when Western corporations move to another country with lower wages. In Western capitalist countries goods are only built to last a short time. Every year a new and slightly improved, but desirable, new feature is added to electronic or electrical products. Poorly fitting clothes, low quality material, lead to fairly rapid disposal. Capitalism deliberately creates a disposable society so consumers not only want, but need, to replace items. We’re constantly bombarded with ads creating the desire for more and newer items. This of course maintains and increases corporate profit at the expense of the masses.
LC at 2011-09-17183.39.26.*
Such move against China is expected, why continue to buy US debts?

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