[Changleen]

http://www.stuff.co.nz/stuff/0,2106,3241109a6026,00.html

BEIJING: China, answering a US threat to slap tariffs on Chinese goods unless Beijng revalues its yuan currency, yesterday urged the United States to tackle its own economic imbalances.

"We have noticed that the US trade and budget deficits have continuously expanded in recent years," said Foreign Ministry spokesman Qin Gang.

"However, the United States should look for the reason from itself so as to adjust the unbalanced sectors in its economy," Qin said.

The comments came a day after the US Senate voted in favour of threatening China with tariffs on its exports to the United States unless it changed its fixed-currency policy, which keeps the yuan pegged near 8.28 to the dollar.

Some law-makers say that level undervalues the yuan by as much as 40 percent, and they blame the policy for a ballooning trade deficit with China that hit a record $US162 ($NZ230.21) billion last year.

Qin called for "equal negotiations" to resolve "frictions and different opinions" on the issue.

Beijing says that while it is committed to eventually allowing market forces to set the yuan's exchange rate, it will take its time so as to avoid upsetting its economy.

So is it 'fair' that China sets it's exchange rate as it does? Surely it has the right to control it's own currency as it sees fit? Surely a huge part of the reason for the trade defecit is that the US has encouraged manucturing and other support functions to move oversees recently and that China is naturally positioned to be a more economic manufacturing base due to the stage of economic development it is at? Why is this trade defecit a problem when your own budget defecit is apparantly OK?

 

[fluff]

http://www.stuff.co.nz/stuff/0,2106,3241109a6026,00.html



So is it 'fair' that China sets it's exchange rate as it does? Surely it has the right to control it's own currency as it sees fit? Surely a huge part of the reason for the trade defecit is that the US has encouraged manucturing and other support functions to move oversees recently and that China is naturally positioned to be a more economic manufacturing base due to the stage of economic development it is at? Why is this trade defecit a problem when your own budget defecit is apparantly OK?

Well, given that the Chinese position results in a currency that is kept higher than its genuine market rate that in itself is not hugely different to an import/export tariff. Therefore whilst it is China's perogative to manage their own economy they are not really in a good position to complain should the US desire to implement tariffs in order to manage their economy.

The US isn't always wrong you know...

 

[Changleen]

Well, given that the Chinese position results in a currency that is kept higher than its genuine market rate that in itself is not hugely different to an import/export tariff. Therefore whilst it is China's perogative to manage their own economy they are not really in a good position to complain should the US desire to implement tariffs in order to manage their economy.

The US isn't always wrong you know...

It's lower, not higher than the genuine market rate.

 

[fluff]

It's lower, not higher than the genuine market rate.

Higher, lower, whatever. Pedantry notwithstanding, my comments remain valid.

 

[Changleen]

Um, No. In this case it's more like a subsidy than a tariff. The opposite.

 

[Damn True]

The US isn't always wrong you know...

You'll have no luck convincing him of that.

If Bush said water was wet he would disagree.

 

[ohio]

Um, No. In this case it's more like a subsidy than a tariff. The opposite.

You still understand that it's an artificial effect, that makes Chinese goods extremely cheap, encouraging foreign investment and the purchase of Chinese goods, which is not making it easy for the US to correct it's trade deficit? China's response is accurate, but too long term.

If China is allowed to create artificial market economics, why shouldn't the US respond by doing the same. Each has a responsibility to protect their own economic interests.

What's to debate? This is not a good/evil type issue.

 

[Changleen]

You'll have no luck convincing him of that.

If Bush said water was wet he would disagree.

Bush wouldn't make such a scientifimical obsermavation.

 

[Changleen]

You still understand that it's an artificial effect, that makes Chinese goods extremely cheap, encouraging foreign investment and the purchase of Chinese goods, which is not making it easy for the US to correct it's trade deficit? China's response is accurate, but too long term.

Yes, Exactly. The more interesting point is that it has been like this for ages. China's rate has been pegged to the $ for donkeys. They've been placed in the international market in a similar position since a tleast the early 80's, if not longer. This has been their position and their strategy for years. All industrialised countries recognise the 'made in China' effect but for some reason under Bush the US has placed itself in a position where it is now a problem for it and is asking China to change to help it out. China has already stated some three or four years back it intends to switch to a market dictated exchange rate but it'll do it at it's own rate. Why should China harm its economy for the US? As you say China is using it's economic power, which it should be remembered operates under rules originally dictated by the west, to do the best for itself. The US asking for help when it has used it's own might to do everything it can to supress Communism for the last 50 years is a bit rich.

If China is allowed to create artificial market economics, why shouldn't the US respond by doing the same. Each has a responsibility to protect their own economic interests.

Yes. I totally agree. They do. But the US purports to represent capitalism and free market economics. China is much more outwardly realistic and transparent about it's motives and goals. If the US behaved more like this it would be more trusted.

What's to debate? This is not a good/evil type issue.

No, it's not. It's an issue of diplomacy and presentation, and if you ask me an example of how the US has created it's own image in the world recently.

 

[Changleen]

China reminds the US of the principals of economics:

Xinhua:

Qin said China has noted the recent discussions on China-US economic ties within the United States congress, as well as America's growing trade and financial deficits.

"As we all know, if one country's fiscal deficit could not be made up by its own private savings, it has to go to foreign exchange inflows, which usually causes deficit problem in current account," Qin said.

Now those guys know how to do dry humour.