China - Currency Manipulator?
There is a consistent amount of talk in the media about China being a currency manipulator. Do you think this is true?
The main thing to keep in mind when thinking about China is how interdependent it and the US really are. The relationship is mutually beneficial, at least on an economic level, and any large changes to the status quo will probably just end up hurting both countries.
Americans benefit from China’s currency manipulation
China undoubtedly keeps her currency at an artificially low level through the purchase of US Treasuries. Labelling her a currency manipulator is accurate, but what gets lost in the never ending rhetoric is the fact that, on the whole, the American people benefit tremendously from China having a low currency, and our economy would take a significant hit if China bowed to the real manipulators, politicians in Washington calling for reform that would end up hurting the general American public.
Satisfied Walmart shoppers
American consumers save a tremendous amount of money thanks to the rate the RMB is kept at. Think about what would happen if half of the prices at Walmart went up 30% overnight. That is exactly what could happen if Chinese officials bowed to pressure from an ever growing American public that is misinformed by many in Washington that revaluing will staunch the flow of jobs out of low to mid end US manufacturing.
The same people that think their jobs would be saved would instead end up having to buy essential products at much higher prices. If China revalued, some of the jobs that were lost to China would instead flow to places like Vietnam, where even cheaper labor can be found than in mainland China.
China holds down US interest rates
America also benefits, at least temporarily, from China holding massive amounts of US debt. In order to revalue their currency, they would most likely have to sell a substantial portion of this debt, driving up interest rates in the States to levels not seen for years. The results of this are pretty easy to imagine for those who know that Americans, as a whole, are more in debt than they have almost ever been!
Competition from China hurts third world countries more than the US
The real truth is that China hurts other “third world” countries, not the US. The more artificially low it keeps its currency by buying US debt, the lower it keeps interest rates in the States, and the more the China is able to shift production from other low wage countries to her own land.
It is about time that more people learned the truth to this, and wised up to the ruse that politicians are trying to use to secure more votes in the upcoming election.
