China currency row heats up in US

[133724]

The White House has rejected moves to cite China as a currency manipulator in the face of growing pressure from the US congress to file a trade case against Beijing on the issue.

...

Senators from both the Replican and Democrat parties, as well as several US business groups have accused China of keeping its currency, the yuan, artificially undervalued to make its exports unfairly cheap.

US businesses say this means they cannot compete, wiping out American jobs,

http://english.aljazeera.net/NR/exeres/08742E63-1FE9-40D6-B49B-8110AD2998CC.htm

[rockymountaindem]

1. This isn't a new issue

I don't understand what's taken so long for this to come to the fore. We've got to file some kind of claim or else start taking punitive measures, IMHO.

[sabbat hunter]

2. well china owns a lot of our debt

plus who are we to tell a country how they rate their money isnt that up to each individual country.

i dont know if we can take any punitive measures since they own so much of our debt.

[rockymountaindem]

3. We can do that

The bonds are due whenever they are due. They can't demand payment ahead of schedule. Also, China owns about only 16% of our debt, which isn't everything. Since we're one of their largest trading partners, I doubt they would want to lose access to our market or damage our ability to buy their products by harming our economy. All they could do is refuse to buy future bonds, and if we can't find any customers to replace them we could always lure business by raising interest rates. It's all a trade-off, but if we decide that taking some kind of action against China, there are ways to offset the potential damage.

As far as "who are we to tell them what to do", well, we're their trading partners. We do business with them. If we say, "no more business until you make some accomidations", it's up to them to accomidate if they still want to do business with us. That's how we can convince them to bend.

[sabbat hunter]

4. they can also dump the bonds

flood the market with them, and US dollars that htey have. it really isnt as easy as you think.

[malaise]

5. particularly while overvaluing

the US dollar. This planet is sick.

[amandabeech]

6. Theoretically, when a nation joins the World Trade Organization,

it is supposed to float or work to float its currency. That means that the currency markets determine what the currency is worth, just like any other markets. Of course, markets can be manipulated. The Japanese are masters of currency manipulation.

The Chinese, as members of the WTO courtesy of Bill Clinton, are supposed to move toward floating their currency, too. However, their progress has been an inch a century, or so it seems.

IMHO, the Chinese don't do anything until they think that it will be to their advantage. Keeping their currency at least 25% below market value keeps their export-led economy humming and providing lousy jobs for a huge number of Chinese leaving rural areas.

For them, a low value of their currency is some protection against another Chinese revolution.

Therefore, trying to deal with them like we would deal with the EU is probably an exercise in futility. At least in my opinion.