Again, the US is trying to convince China to increase the value of the Yuan against the dollar. As some of the comments to this article attest, the cost of the change would be to American consumers. There are also many US companies that do not like the idea, because they have operations in China, based on taking advantage of the cheap labor and resources.
Not all American companies favor pushing for a stronger yuan. Executives of multinationals with big operations in China tend to favor keeping currency rates steady.
“The stable yuan is obviously easier for managers to cope with,” says Kevin Wale, president and managing director for General Motors China Group, which sources 85 percent of its parts locally.
The political pressure in the US is based on job creation, and some economists–not all–argue that maybe a million jobs could be created in the US if the dollar were cheaper.
China, meanwhile, argues that a revaluation would not have a significant effect on trade balances, and the drop in the Euro has already put pressure on Chinese manufacturers.
Chinese policymakers insist that adjustments in the yuan’s value will have little direct impact on the trade balance with the United States, and some fret that the yuan’s nearly 15 percent gain against the euro is already too great a burden.
“A revaluation would not bring any good to our economy, as our exporters already are under heavy cost pressures. It would be dangerous to revalue,” said Yi Xianrong, an economist at the government-run Chinese Academy of Social Sciences in Beijing.
I agree with Treasury Secretary Timothy Geithner, who said that China will do what they think is best for themselves, and that will probably include a revaluation sometime in the future.
“I think it is, of course, China’s decision about what to do with the exchange rate — they’re a sovereign country,” Geithner said. “But I think it’s enormously in their interest to move, over time, to let the exchange rate reflect market forces, and I’m confident that they will do what’s in their interest,” he said while visiting Boeing and other exporters in Washington state.