The Currency Manipulation Bill
has been passed in the House of
Representatives with a large majority, targeting China. While
many view a full-scale currency war between the US and China as not a very
smart idea, with a record-high unemployment rate, depressed blue-collar and
even white-collar wages, a struggling economy, and a general perception
that American dominance in the world is ebbing away towards a
`Communist' China, chances are that in the run-up
to the mid-term elections, the President should like to be seen to be keeping
his finger firmly on the Bill's trigger.
The irony is that even if Chinese products were entirely priced out of
the world market, this may not succeed in turning the tide for US exports and
jobs. Consumers in the US and elsewhere are likely to buy similarly
competitively-priced substitutes produced by other developing countries.
Moreover, as China's Premier Wen has pointed out, the yuan has appreciated by
some 55% since China's first currency reform in 1994. Since then, this magnitude
of appreciation has not helped US exports or reduce Chinese imports.
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