China’s currency manipulation is a worldwide problem, not just a job-killer here.
U.S. Ambassador Calls China’s Currency Stance ‘a Real Concern’,
In a speech to students at Beijing’s Tsinghua University, the ambassador, Jon Huntsman, said that economic problems in the United States had increased pressure there for a change in the value of the renminbi, which China currently ties to the value of the dollar. That has kept Chinese exports comparatively cheap and, critics say, hampered other nations’ recovery from the global recession.
“My Chinese friends like to pitch this as just an American issue. I like to say that there are many countries that feel the same way,” Mr. Huntsman said. But he focused on the growing political backlash from Americans who feel the currency policy is hurting them. [emphasis added]
The managing director of the IMN – the ‘I’ stands for “International” – agrees. IMF Head Says Yuan Remains Undervalued
International Monetary Fund Managing Director Dominique Strauss-Kahn said Wednesday that China’s currency remains undervalued.
The resulting huge trade imbalance is hurting the entire world. From the NY Times editorial that I linked to yesterday, Will China Listen?,
China’s decision to base its economic growth on exporting deliberately undervalued goods is threatening economies around the world. It is fueling huge trade deficits in the United States and Europe. Even worse, it is crowding out exports from other developing countries, threatening their hopes of recovery.
In the Financial Times, Martin Wolf writes in China and Germany unite to impose global deflation,
[. . .] Surplus countries insist on continuing just as before. But they refuse to accept that their reliance on export surpluses must rebound upon themselves, once their customers go broke. Indeed, that is just what is happening. Meanwhile, countries that ran huge external deficits in the past can cut the massive fiscal deficits that result from post-bubble deleveraging by their private sectors only via a big surge in their net exports. If surplus countries fail to offset that shift, through expansion in aggregate demand, the world is inevitably caught in a “beggar-my-neighbour” battle: everybody seeks desperately to foist excess supplies on to their trading partners. That was a big part of the catastrophe of the 1930s, too.
The United States is not alone here. If the United States takes a stand the world will be behind us. We need to do what is right. On April 15 the President should declare China to be the currency manipulator that it is. Then trade can start to rebalance.
