Skip to main content

IMPLICATIONS OF THE YUAN'S OVERVALUATION


American lawmakers are raising serious questions regarding China's alleged currency control measures. According to a CNN.com article, some US legislators and economists believe that the Yuan is overvalued by as much as 40%, making Chinese products unusually competitive in the export market.

A deliberate move to restrict the appreciation of a currency's value is currently viewed as a form of export subsidy and some believe that it has greatly contributed to the huge volume of Chinese exports to the US. At this point, there exists a huge trade deficit between China and the US, with the latter on the losing end by as much as US$233 (2006).

This column believes in minimal government action as the best way of running an economy. The Chinese government can best support its citizens by minimizing its intervention in the currency trade. If the currency's value is allowed to fall freely, uncompetitive companies will lose in the export market and die a natural death.

Sad it may seem, it actually eliminates the country's uncompetitive industries, therefore allowing the Chinese workers to transfer and acquire better skills, in areas where the country has competitive edge. In the long run, it will lead to a more competitive China.

Related article: Peso Gaining way too fast

Comments

Popular posts from this blog

US PRESIDENTIAL CONVOYS

A columnist for a Philippine newspaper talks about the costs and massive preparations required by the US Secret Service whenever President Bush and other (US Presidents) travel outside of Washington DC. I remember watching a CNN report that showed how big a US presidential convoy is, compared to the two vehicle transport being used by Prime Minister Tony Blair of the UK.

DOHA Round Updates & Preferential Tariffs in Practice

T he DOHA round of the World Trade Organization (WTO) negotiations intends to promote the opening of markets and promoting free trade. This April, the latest meeting failed to reach a conclusion. Director-General Pascal Lamy of the World Trade Organization delivered a speech before the US Chamber of Commerce on April 23, 2007. Here are excerpts from his speech. "T oday we know that the Doha Development Round will not be concluded until and unless all these participants are ready to walk the extra mile and table additional contributions to the collective success of this multilateral enterprise. It is clear that the contributions will be linked to the degree of development and wealth of each participant, with the world poorest countries making the smallest contribution. It is also clear that no one will be asked to move first: countries will have to move in concert, like a big orchestra playing to the same tune. For the moment, a group of major actors — the EU, US, Brazil, India — d

Competitive Advantage of the Philippines II

Despite being a newcomer in the global BPO industry, the Philippines have steadily increased its foothold as a top outsourcing destination. Rest of Asia ready to grab BPO jobs from India, RP--study INQ7.net, Agence France-Presse Last updated 08:44pm (Mla time) 11/05/2006 THE PHILIPPINES and India have to boost their overall competitiveness, as Asian countries gear up to get their share of the global offshore outsourcing pie, a recent global study showed. These top two outsourcing destinations will eventually compete with China, and other Asia Pacific countries that have similarly positioned themselves as outsourcing destinations, the latest Offshore City Competitiveness Report of market research firm neoIT showed. The study noted that companies have "moved beyond India" and the Philippines into not so well-known cities in the world since companies want to create a "global footprint." China and Eastern European countries are starting