Chinese Premier Wen Jiabao pressed his case that the yuan had little to do with trade deficits and joblessness in the US. His comments come just as the Ways and Means Committee prepared to vote on a bill that would call for the Treasury to press China to revalue its currency. The committee has said the yuan needs to rise by 20%.
Wen Jiabao added that a revaluation would not help US businesses. “The main reason for the U.S. trade deficit with China is not the renminbi exchange rate, but the structure of trade and investment between the two countries,” he added.
What the prime minister did not say is that, over time, Chinese trade practices and the value of its currency have almost certainly contributed to the demise of America’s manufacturing base. Congress is not only angry about the future. It is incensed about the past. And to some extent, the bill to thwart China’s trade practices is a retribution for damage already done.
Congress also believes that China’s action threatens the future of US industry. The Obama Administration means to sharply increase American exports to restart GDP growth as it looks to off-set the decline in consumer spending which may never fully return.
China also faces what seem to be reasonable charges that it discriminates against American companies which do business on the mainland. That is another case in which a revaluation of the yuan may not help. But, pressure on the yuan is a shot across the Chinese ship meant to be a warning about a range of actions that the US believes are economically discriminatory.
Douglas A. McIntyre
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