China And U.S. Trade -- An Unbiased View?
I rely on the Economist Magazine for a non-U.S. view of the United States. I see the Economist as generally pro-business and pro-United States, yet not afraid to criticize when criticism is warranted. Reading it is like going to a friend for objective advice. Its recent issue has a very interesting, well thought out post saying that blaming U.S. economic troubles (it seems to me the United States is actually doing just fine economically) on the value of the Chinese Yuan is wrong. It also says that Yuan appreciation against the dollar will cause more harm to the United States than good.
It is titled, "Lost in Translation: If China sharply revalued the yuan, as American politicians are demanding, it could actually hurt the United States and help China," and it is certainly well worth a read.
Comments (10)
Read through and enter the discussion by using the form at the endIP Dragon - May 21, 2007 3:01 AM
Hi Dan,
In the leader of the same Economist called 'America's fear of China' which was about the same subject (appreciation of the yuan)the Economist suggested that to do anything about the protection and enforcement of copyrights does not really matter much. The Economist tried to compare the revaluation of the yuan to IPR protection, apples to oranges in my view. See here:
Cheers,
IP Dragon
China Law Blog - May 21, 2007 10:37 PM
IP Dragon --
Unfortunately, I could not read the article because I am not a subscriber. I will try to hunt it down elsewhere.
China Law Blog - May 21, 2007 10:40 PM
Tom --
I agree that these Chinese companies have no room in their margins to reduce costs any further, but does this not mean that Yuan appreciation will cause prices to the US consumer to increase, just as the Economist claims?
nanheyangrouchuan - May 21, 2007 11:09 PM
Businesses tout the same lines regarding Yuan revaluation, minimum wage increases in the US and tighter environmental regs: The cost to do business will become an upward death spiral resulting in massive unemployment and damage to the US consumer resulting in a big economic slowdown.
A market adjusted yuan will cause temporary hardship for US consumers, but no more than they already face with persistently high fuel costs and an extra 2-4% increase in their recently reset mortgage.
The good will come from much poorer ASEAN countries having to "race China to the bottom" of fixed currencies and low wages. They'll be able to relax their currency pegs and raise their standards of living.
What is really bad for US consumers? Toxic food and hygiene products.
Duncan - May 23, 2007 2:47 AM
Chinese exporters have already been raising their unit prices every year from 2005 (before which they'd fallen steadily for years). Margins are still squeezed as their costs are still rising faster. Someone has to take a hit from this - be it the retailer or end-consumer, and the signs are that for the first time in years companies are starting to try to pass more rises onto customers. The latest Bank of England inflation report has some interesting things to say on this (presumably the Fed does too, but I'm afraid I hear less about their reports).
Interestingly, one of the main reasons the rise in Chinese export prices isn't having a big impact on its competitiveness yet is that most rival low-cost producers are also seeing strong growth in their costs, particularly for labour as wages are rising fast pretty much across the region. Sweat shop workers of the world unite...
China Law Blog - May 24, 2007 11:41 AM
nh --
That is certainly one view....
China Law Blog - May 24, 2007 11:43 AM
Tom --
Okay, then what?
China Law Blog - May 24, 2007 11:45 AM
Duncan --
I think you are right. Natural evolution, I dare say.
Chinapoint - May 25, 2007 10:00 PM
In the past two years, the Chinese yuan appreciated 8% vs. the dollar, but the U.S.-China trade deficit rose ($201.5 billion in 2005 and $232.5 billion in 2006)-- based on data from the U.S. Commerce Department.
People who argue a stronger yuan will help narrow the U.S. deficit belong to two groups -- one, they don't have brains; second, they have other motives, like politicians. Very simple.
infodriveindia - June 1, 2007 3:05 AM
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