Another hot issue has been China's currency policy. Starting in 1994 China kept its currency intentionally undervalued by pegging renminbi (RMB) to the U.S. dollar thus maintaining the same exchange rate for over a decade. In 2005 China reformed its currency policy by making RMB exchange rate adjustable which resulted in almost 19% appreciation of RMB in 2009. However, this policy of a "managed float" with the Chinese government's intervention has been keeping RMB from freely floating based on the exchange market conditions. Many believe that the policy has contributed to the enormous U.S. trade deficit with China by making Chinese exports cheaper than imports and is responsible for manufacturing job losses in U.S. It also helped China purchase a large number of U.S. securities making China the largest holder of U.S. Treasuries in 2008. While for some it is a positive factor that helps fund the U.S. economy, for others it is a concern that it might give China more power over the U.S. Some even attribute the cause of the global financial crisis to Chinese currency rate-fixing as it resulted in current account imbalances.5
Other trade issues with China include safety of Chinese consumer products and food; China's continuing violation of its WTO obligations and its policies aimed at protecting and assisting domestic producers while restricting foreign access to its markets.
1. U.S. Census Bureau. "Foreign Trade Statistics: Top Trading Partners - Total Trade, Exports, Imports,"
http://www.census.gov/foreign-trade/statistics/highlights/top/top0912yr.html#exports, as viewed on September 8, 2010.
2. Wayne M. Morrison, "China-U.S. Trade Issues," Congressional Research Service. Library of Congress. June 23, 2009. p.7. http://www.fas.org/sgp/crs/row/RL33536.pdf [PDF Format: 291 KB / 30 p.], via the web site of the Federation of American Scientists, as viewed September 8, 2010.
3. "Global Trade Atlas," Global Trade Information Services, Inc. (GTI). Subscription Database.
4. U.S. Census Bureau. "Foreign Trade Statistics: Trade with China."
http://www.census.gov/foreign-trade/balance/c5700.html#2009 as viewed September 8, 2010.
5.Tony Blankley, "China's currency rate-fixing; Primary cause of the world financial crisis? Special to the Washington Times," Washington Times, April 21, 2009. pg. A.19.
Last Updated: 11/9/2010
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