U.S. - China Foreign & Global
Trade Policies
—— U.S Trade deficit and China’s
Currency Policy
Recent Research Studies & Sources … Links
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2012-CRS-China-U.S. Trade Issues,
http://www.fas.org/sgp/crs/row/RL33536.pdf
2011-CRS-China's Currency Police-An Analysis of the Economic Issues,
www.fas.org/sgp/crs/row/RS21625.pdf
2013-CRS-International Trade and Finance-Key Policy Issues for the 113th
Congress, https://www.fas.org/sgp/crs/misc/R42882.pdf
2013-USCBC-China and the US Economy-Advancing a Winning Trade
Agenda, https://www.uschina.org/info/trade-agenda/2013/uscbc-tradeagenda-report.pdf
EDWARD P. LAZEAR, Chinese 'Currency Manipulation' Is Not the
Problem, http://online.wsj.com/article
/SB10001424127887323320404578213203581231448.html
• 2011-CRS-China's Currency Police-An Analysis of the Economic
Issues , www.fas.org/sgp/crs/row/RS21625.pdf
• 2012-CRS-U.S. International Trade-Trends and Forecasts,
www.fas.org/sgp/crs/misc/RL33577.pdf
• 2013-CRS-Trade Primer-Qs and As on Trade Concepts,
www.fas.org/sgp/crs/misc/RL33944.pdf
• 2010-CRS-The U.S. Trade Deficit: Causes, Consequences, and Policy
Options. http://www.dtic.mil/cgi-bin/GetTRDoc?AD=ADA525490
• Joseph Gagnon, Combating Widespread Currency Manipulation.
http://www.iie.com/publications/pb/pb12-19.pdf
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Overview
What is currency manipulation? Is China a currency manipulator?
If so, how much is the RMB undervalued?
Is the currency manipulation leading to the trade deficit?
How to deal with exchange rate from the perspective of trade policies
Overview
• The U.S. trade deficit with China has surged over the past
two decades.
2012-CRS-China-U.S. Trade Issues
Overview
• Meanwhile, China has maintained a policy of intervening in currency
markets to limit the appreciation of its currency, RMB, against the
U.S. dollar and other currencies. That’s so called “currency
intervention or manipulation”.
China's Currency Police-An Analysis of the Economic Issues - CRS 2011
Overview
• Critics contend that the RMB is significantly undervalued against the
dollar and that this has been a major contributor to the large annual
U.S. trade deficits with China and the loss of U.S. jobs in recent years.
China's Currency Police-An Analysis of the Economic Issues - CRS 2011
http://www.nihao-salam.com/article-detail.php?id=MTgx
What is currency manipulation?
Is China a currency manipulator?
• Indeed it is
• —as are all countries that
maintain a fixed or a
close-to-fixed ratio of
their currency relative to
the dollar, euro or gold.
EDWARD P. ,Chinese 'Currency Manipulation' Is Not the Problem
http://online.wsj.com/article/SB10001424127887323320404578213203581231448.html
Joseph Gagnon, Combating Widespread Currency Manipulation.
If so, how much is the RMB undervalued?
• Unfortunately, there is no universally-accepted methodology for
determining a country’s real market exchange rate.
• Thus, there are numerous estimates of the RMB’s undervaluation
against the dollar, although the results vary widely depending on the
methodologies and various assumptions used.
China's Currency Police-An Analysis of the Economic Issues - CRS 2011
If so, how much is the RMB undervalued?
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Relatively recent estimates include:
(1)12%(December 2009)
(2) 25%(December 2009)
(3) 30%(April 2010)
(4) 40.2% (January 2010), 24.2% (June 2010), 28.4% (April 2011),
and 23.5% (November 2011)
• (6) 50%(October 2009)
China's Currency Police-An Analysis of the Economic Issues - CRS 2011
If so, How much is the RMB undervalued?
• Because there is no universally-accepted methodology, and
since estimates of China’s currency valuation differ so
significantly, their usefulness in trade policymaking or
legislation that would seek to offset the benefit (“subsidy”)
conferred by the RMB’s undervaluation, such as in U.S.
anti-dumping and countervailing measures, is being
questioned.
China's Currency Police-An Analysis of the Economic Issues - CRS 2011
Is the currency manipulation leading to the trade deficit?
• The exchange rate’s impact on the US
trade balance is minimal, or not directly
related, as the chart below shows.
2013-China and the US Economy-Advancing a Winning Trade Agenda
Is the currency manipulation leading to the trade deficit?
• The U.S. also have trade surplus with those whose
currency is undervalued.
2012-CRS-U.S. International Trade-Trends and Forecasts
China's Currency Police-An Analysis of the Economic Issues
- CRS 2011
How to deal with exchange rate from the perspective of trade
policies?
• Keep doing researches and try to find a more accurately
and universally-accepted methodology in determining a
country’s real market exchange rate.
• Keep negotiating with Chinese government. That works.
• Focusing on trade policy to reduce trade deficit, instead of
currency policy.
• Thank you!