China relaxes controls on Yuan
Chinese accused of maintaining weak exchange
Chinese imports into the lucrative US market are starting to hurt and that's official. The last independent maker of TV's in the US wants an 84% tariff put on all imports of these mainstream purchases from China and Malaysia. He accuses producers in these two countries of 'dumping' products on the US market.
Once it was Japan and its near neighbour South Korea who frightened US manufacturers. Now their attention has been turned to the new powers in the Far East. The US trade deficit with China is $44 billion and rising.
The 'low' price of the Chinese currency has also attracted the notice of concerned US-based producers. Pressure is now on for the President to demand that the Chinese currency (renminbi) be floated. The drive for protectionism is gaining momentum and tariffs and other barriers are threatened. US textile producers are complaining that imports from China, which became a member of the WTO in 2001, are costing thousands of US jobs.
So, is this a genuine threat to the living standards of those US people working in these industries, or is it simply the domestic economy growing accustomed to the globalisation of trade and the shift of manufacturing capacity to more 'economic' locations? The US companies point to low wages and few labour protection rules in China. As a country, its old political regime can still cause problems, for it allows the industrial sector to launch new products with enormous speed - command economies can still exert pressure on conforming with whatever they want its people to do.
The battle is set to begin and who can guess the outcome?
You may also like to read the article:
(you can do this in the window below or follow the previous link to read the article in a separate window) and then consider answers to the questions below.
- Define (a) dumping and (b) floating exchange rates
- Examine the reasons why China's decision to relax its control over the yuan should help US producers.
- Discuss the advantages and disadvantages of the USA introducing trade barriers against Chinese goods