The impact of Yuan Revaluation

Posted by admin on April 11, 2010 under Articles | Be the First to Comment

Asia’s growth is impacting global financial relations, but the debate about the Chinese currency may be oversimplified.
Photo Credit: Flickr
As China’s overall trade surplus has continued to exceed market expectations, the United States is campaigning to persuade China to increase the value of its currency. Photo Credit: Flickr
The battle over revaluing the Yuan has big implications for the US economy, US-China relations, and the US’s global leadership role. As China’s overall trade surplus continued to exceed market expectations and reach record highs through 2006, US Treasury Secretary Henry Paulson, picking up where his predecessor John Snow left off, began a campaign of trying to persuade China to increase the value of its currency. The argument is that China is keeping the value of its currency low so that it can boost its exports. China allowed its currency to strengthen by 2.1 percent in 2005 as a response to these calls.

Not only does this debate mirror US concerns during the 1980s about the Japanese yen, but it is also riddled with the same oversimplifications. US pressure on Japan during the 1980s caused resentment in Japan toward the US but did little to improve the US trade deficit. Some even blamed the US for the subsequent real estate bubble that occurred in Japan.

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