China's Currency is Unfair Trade
By Geno A Bulzomi
Copyright, Sept 2007

China’s currency is purposely undervalued to undermine competitors and take advantage of increased trade with foreign nations. When a country’s currency is worth less than their trading partners it encourages more importation by the country with the stronger currency.  The United States dollar can buy more Chinese products, than it can buy products from other countries because a US dollar is worth more than the Yuan—therefore it can buy more.  China pays its workers in its own currency and automatically creating a less expensive workforce than countries with a stronger currency.  They also only pay their workers a fraction of what Western nations pay their workforces making their products dirt cheap compared to products made outside of China. 

"Managing currency changes has not been a strong area for China."

China used to only appoint loyal party members to economic posts based upon nothing more than party membership and bribes.  Now they are starting to ensure that they have trained economists in the key positions to keep a handle on their new economic fortunes.  Allowing their currency to adjust to economic indicators and markets might be too much for the country to handle.  Managing currency changes has not been a strong area for China.

"massive inflation, causing prices to rise dramatically and eventually casued the government to go bankrupt."

In 845 C.E. China took radical steps to revolutionize monetary exchange by implementing paper currency.  This lead to inflation; massive inflation, causing prices to rise dramatically and eventually caused the government to go bankrupt.  China is being careful about changing its monetary system these days and approaching a floating currency with caution.  However, China is coming under increased pressure to allow its currency to float by the international community.  By purposely setting their currency lower than other nations they are essentially practicing unfair trade.   If China’s main trade partners finally start applying tariffs and other concrete pressures to force them to give up their monetary advantage nations may start experiencing parity in trade.  Maybe the United States will only have a 200 billion dollar trade deficit with China instead of the $235 billion deficit we had last year.  Hey, at least it would be a start!

Copyright, September 2007
Material can be used with proper citation

 

 


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