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March 24, 2010

Even Chinese CEOS Call For Chinese Currency Fix

-- by Dave Johnson

This post originally appeared at Campaign for America's Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.

The pressure from the huge Chinese currency imbalance shows up in surprising places. Even Chinese CEOs are calling for China to increase the value of its currency to market rates.

China CEOs Join Obama in Supporting Yuan Appreciation

Yang Yuanqing, chief executive officer of Beijing-based computer maker Lenovo Group Ltd., said gains would boost consumers’ purchasing power. Qin Xiao, chairman of China Merchants Bank Co., said an end to the yuan’s 20-month peg to the dollar would let lenders set market-based interest rates. Chen Daifu, chairman of Hunan Lengshuijiang Iron & Steel Group Co., said a stronger currency would cut import costs.

[. . .] Chinese banking executives blame the yuan peg for disrupting money markets. China’s dollar purchases to maintain the link have driven currency reserves to $2.4 trillion and flooded the financial system with yuan.

By pegging its currency to the dollar the Chinese government is distorting the entire world's economy. This has negative effects for the Chinese as well as positive effects, and as the imbalance becomes greater those affected negatively are going to apply more pressure. In this case it is Chinese people and companies who want to buy from outside of China who are feeling the pain.

Chinese currency is only one part of the trade imbalance equation -- but it is a very big part. It accounts for a price differential of as much as 40%! Another part of the equation is China's suppression of labor rights. Chinese workers would be calling for a currency revaluation -- if they could. If workers were allowed to organize they would apply pressure on the government to ... revalue its currency so they could afford things made elsewhere. And they would certainly apply pressure on the government to clean up its environmental act - one more area where China is distorting the natural balance.

P.S. In case you missed it yesterday, see this interactive map showing just how many jobs have been lost to China since 2001.

Everyone knows that we have lost a lot of jobs to China since 2001. Now you can find out exactly how many, and where.

The Alliance for American Manufacturing and Economic Policy Institute released a report titled, “Unfair China Trade Costs Local Jobs” by EPI's Robert Scott. Along with the report AAM has set up a website with an interactive map that shows job losses to by state and Congressional District.

AAM_Map
Click the map.

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Posted by Dave Johnson at March 24, 2010 11:33 AM


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