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Trade war between the U.S. and China

Nope. In 1997 there is huge pressure of depression on the Yuan, but the then prime held the line.

From the long run, the exchange rate should be decided by the market. But i don't think the value of RenMinBi or people's currency (of China) should be decided by politics in Washington or managers of Wall Street.

Occasionally, but not nearly often enough, a dispute bursts out into the open that helps give meaning to the protests that by now predictably accompany every gathering of world leaders – protests that are no doubt something to brace for when the G20 descends on Toronto in June.

Although media attention has been focused of late on China and Google Inc., the bigger issue is China's craven manipulation of its currency for the past decade or so, in order to make its exports more competitive in Canadian and other global markets. This is a patently unfair trading advantage that has caused widespread job loss across North America and, in effect, finds China stealing jobs even from its Pacific Rim neighbours. Beijing's deliberate suppression of the yuan, a.k.a. the renminbi, at a level far lower than its true value if allowed to "float" the way the loonie and other major world currencies do, has played no small role in the "hollowing out" of North America's manufacturing base.

Some Americans in high places finally are saying enough is enough. For a decade, Western world capitals have gently prevailed on the regime in Beijing to cease and desist in its manipulation of its currency.

But as recently as March 14, Chinese Premier Wen Jiabao made the absurd declaration that "I don't think the renminbi is undervalued. We oppose countries pointing fingers at each other and even forcing a country to appreciate its currency."

Putting aside Beijing's ritual efforts to force other heads of state not to extend hospitality to the Dalai Lama, Wen's outburst is a clear signal that further diplomatic entreaties will have no effect in changing a "Chinese currency policy (that) is adding materially to the world's economic problems at a time when those problems are already very severe," says U.S. economist Paul Krugman, who won his 2008 Nobel Prize for his work in trade policy.

The dynamic Chinese economy is long past the point of needing the economic crutch of a currency whose government-manipulated low value does not begin to reflect China's now awesome export prowess. The International Monetary Fund estimates that China will close the year with a trade surplus of $450 billion (U.S.) – about 10 times' the size of China's surplus just seven years ago.

That is, says Krugman, "the most distortionary exchange rate policy any major nation has ever followed." At least five U.S. senators agree, in one of Washington's few bipartisan efforts in recent times. Spearheaded by New York Democrat Charles Schumer and South Carolina Republican Lindsey Graham, the five senators earlier this month introduced legislation to enable the U.S. to more easily identify currency manipulation and take retaliatory action.

Where the protesters come in is that Big Business stands four-square against rattling China's cage. "We're lashing out at China rather than tending to our own business," says Stephen Roach, Asia chairman of New York investment bank Morgan Stanley, whose clients include Beijing, Chinese companies and Western firms doing business in China.

Companies as varied as Canada's Bombardier Inc. and BlackBerry inventor Research In Motion Ltd.; along with General Motors Co., which does its most profitable business worldwide in China; and General Electric Co., eager to tap a huge Chinese market for its power-plant turbines, would much prefer that victims of Chinese currency manipulation continue their vain practice of issuing subtle complaints rather than dropping the gloves.

But that's an approach that favours a few blue-chip multinationals and works powerfully against working people outside of China. As a remedy, Krugman suggests a 25 per cent or so surcharge on Chinese imports. He cites the 1971 precedent in which the U.S. applied a 10 per cent surcharge on goods from Germany, Japan and other nations with undervalued currencies. Those surcharges were removed just a few months later after those nations with artificially low currencies allowed them to float upward.

There are much tougher sanctions that could be applied to China. Western nations could simply close their markets to the export-driven Chinese economy, making an abrupt end to that nation's industrial revolution. They could end the transfers of Western technology that Beijing insists upon as part of every Western industrial partnership in China.

Naysayers object that the Chinese could dump their massive $889 billion in U.S. currency reserves. But the greenback would plummet in value the moment China began to sell, devaluing the rest of its U.S.-denominated securities. Besides, a cheaper greenback would be an enormous competitive advantage for America.

"Right now America has China over a barrel, not the other way around," Krugman notes.

The question is whether Western governments will seize the initiative to force China to abide by the same rules to which the rest of the global industrial community holds itself. A dynamic Chinese economy is in everyone's interests. One that plunders jobs worldwide and ignites widespread resentment is not.

Olive: China's artificially suppressed currency costs jobs - thestar.com
 
Well, I know that RT, CNN, BBC and so on present one side story on major issues but trade dispute is a fact.

I will post my opinion here.

I love China because they helped Pakistan a lot in the past.
I respect them...
:china:

On the other hand, I think the U.S. should move out of China and produce goods locally regardless of high prices..this way new jobs will be created in the U.S...and so on...it will have a positive impact on the economy in the long run...

Same goes to China..Chinese companies should fill the gap of American companies and should produce goods locally..
This thing applies to every country...
In other words, I am against globalization up to certain extent. I have not come to the conclusion yet but till now I am against globalization...

If every country can fulfill its own demands by producing things locally than it is a very good move...


I think the U.S. is planning to move out of China in the long run...
It will have devastating effects on Chinese economy but I don't think China will over react to the situation because it is up to the business community...
Furthermore, I think China is moving to become hi tech country which will balance the situation even if the U.S. moves out...


Any suggestions from professionals...

If any countries economy is based totally on exports in present times they will start to lose as consumers in America that kept these countries busy have simply run out of money and credit is not as easy to come by as it was before.

That why you see Chinese government spending huge amount of money in infrastructure to spread money around in their local economy so local can start to buy and in the long run it will create jobs and they will not be effected by other economies as much.
 
Well, I know that RT, CNN, BBC and so on present one side story on major issues but trade dispute is a fact.

I will post my opinion here.

I love China because they helped Pakistan a lot in the past.
I respect them...
:china:

On the other hand, I think the U.S. should move out of China and produce goods locally regardless of high prices..this way new jobs will be created in the U.S...and so on...it will have a positive impact on the economy in the long run...

Same goes to China..Chinese companies should fill the gap of American companies and should produce goods locally..
This thing applies to every country...
In other words, I am against globalization up to certain extent. I have not come to the conclusion yet but till now I am against globalization...

If every country can fulfill its own demands by producing things locally than it is a very good move...


I think the U.S. is planning to move out of China in the long run...
It will have devastating effects on Chinese economy but I don't think China will over react to the situation because it is up to the business community...
Furthermore, I think China is moving to become hi tech country which will balance the situation even if the U.S. moves out...


Any suggestions from professionals...

If any countries economy is based totally on exports in present times they will start to lose as consumers in America that kept these countries busy have simply run out of money and credit is not as easy to come by as it was before.

That why you see Chinese government spending huge amount of money in infrastructure to spread money around in their local economy so local can start to buy and in the long run it will create jobs and they will not be effected by other economies as much.

Agreed!
It is a very smart move by China and the most important thing is that they anticipated the future when they have cards in their hand...
:china:
 
Yes Saad, your view is correct to an extent. Countries (or clusters of them) should be competent and "reasonable self-sufficient" in key sectors.

It goes without saying that a Luddite/Gandhian isolationist "we-spun-every-thread-of-the-yarn-we-wore" approach isn't feasible or helpful. But the current round of globalization has increased the gap between the rich and poor too disproportionately ...

It increased the wealth of the traders much more drastically relative to the wealth of the producers. Well, perhaps that's the way things ought to be. But its corrupting effect is beginning to outweigh its uplifting effect.

Just my 2 cents anyway.

This business of shipping containers upon containers of trinkets in exchange for electronic US$ that were unrepayable and unredeemable (and never intended to be) is poisonous.

The PRC thinks it has 2.x trillions of ... whatever ... and I tell ya it's just one computer glitch away from one of ancient India's enduring inventions - 0!

I am surprised that after the collapse of World Trade Centres Amrika hasn't just declared that the debt was wiped out! Sorry, it simply got too hot in there - even them super duper secured hard drives got demagnetized ... and our sincere apologies! :smitten:

The PRC's position is no better than the Saudis IMO. After decades of shipping out the latter's "non-renewable resource", what have the Saudis got to show for it? I suppose billions upon billions of minority stakes in "Amrikan enterprises" as proof of their contribution and integration into the "world economy", which are of course subject to instant "freezing" at the first sign they begin to "enrich" an ounce of uranium or stupidium (or rather, hire some South Asians to do it for them if past history serves any guide ...)

While Iran wishes to essentially "barter" oil for tech ...

I wonder who is on the right track.


Great piece!
:tup:

I am surprised that after the collapse of World Trade Centres Amrika hasn't just declared that the debt was wiped out!
It is already announced within specific circles but healthy economies are not accepting it!
China is playing the right cards...

I have to say that Chinese government is smarter than USSR government!
:smitten:
 
All those internal developments are to share the load of exports, and they want the rail network to be established to the west

Just a thought, would you define arbitrarily printing money from paper as currency manipulation?
 
...
Just a thought, would you define arbitrarily printing money from paper as currency manipulation?

Of course not. Does "Amrikan exceptionalism" not ring a bell?

However, in all honesty, it's America's currency and if their people allow their government to fell as many trees for the sake of the greenback then it's their prerogative.

But if you believe the paper so produced is worth holding - then as former US Treasury Secretary Connally used to say: "it's your problem" ...
 
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Agreed!
It is a very smart move by China and the most important thing is that they anticipated the future when they have cards in their hand...
:china:

Truth be told Saad, no state can be so optimistic as to claim that she anticipates the future and know how the "cards" will lay across the table.

Least of all the PRC. You may not know this - but Deng famously touted that China was "wading across the river by stumbling on the pebbles" ...

Again, as old man S2 would say - either you find the answer or the answer finds you.
 
Truth be told Saad, no state can be so optimistic as to claim that she anticipates the future and know how the "cards" will lay across the table.

Least of all the PRC. You may not know this - but Deng famously touted that China was "wading across the river by stumbling on the pebbles" ...

Again, as old man S2 would say - either you find the answer or the answer finds you.

Well, I think that China can anticipate the relation with the U.S. in future...
Two super powers cannot sustain for a longer period of time and I think China knows it very well. So they are playing right cards as the U.S. is doing...
 
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