Debate Over Chinese Yuan Manipulation Heats Up
March 15, 2010 at 13:15 UTC || By Forex Playmaker
Reuters reports that US lawmakers are pressing for action in Beijing, where an actively depressed Yuan offers the Chinese an unfair advantage in global trade:
President Barack Obama faced growing congressional pressure on Monday to get tough with China over its currency practices, one day after Chinese Premier Wen Jiabao brushed off accusations that Beijing was undervaluing its currency for an unfair trade advantage.
“The impact of China’s currency manipulation on the U.S. economy cannot be overstated. Maintaining its currency at a devalued exchange rate provides a subsidy to Chinese companies and unfairly disadvantages foreign competitors,” 130 lawmakers said in a letter to U.S. Secretary Timothy Geithner and Commerce Secretary Gary Locke.
Many economists estimate China’s currency is undervalued by 25 to 40 percent, giving it a huge trade advantage by effectively subsidizing its exports and taxing its imports.
In the not-so-distant past, the debate over the depressed Chinese currency was being held behind closed doors between high ranking US and Chinese officials. The new strategy being employed by US lawmakers apparently favors use of the media to get the point across. While this method may score points for US lawmakers among their own constituency, it will certainly anger the Chinese — and considering the amount of US debt being held in China, angering the Chinese may not be the best approach.
Full Artice: U.S. lawmakers press for action on China currency
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